LONDON MARKET PRE-OPEN: Stocks To Slump; DS Smith Interim Profit Up

LONDON (Alliance News) - Stocks in London are set for another slide on Thursday as worries over ...

Alliance News 6 December, 2018 | 7:44AM
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LONDON (Alliance News) - Stocks in London are set for another slide on Thursday as worries over US-China trade relations continue to weigh on the minds of traders.

In early company news, packaging maker DS Smith reported a rise in interim profit, retailer Ted Baker said it turned out a "resilient" performance despite unseasonable weather, and insurer Beazley said expects to book USD40 million from wildfires in California.

IG says futures indicate the FTSE 100 index of large-caps to open 54.94 points lower at 6,866.90 on Thursday. The FTSE 100 index closed down 100.92 points, or 1.4%, at 6,921.84 on Wednesday.

Thus far this week, the blue-chip index is down 0.8% and is currently 10% lower since 2018 began.

"Asian markets and US futures plummeted overnight as news broke that Huawei's CFO had been arrested in Canada to be extradited back to the US. The CFO, Wanzhou Meng, was arrested for allegedly breaching Iran sanctions. China criticized the US and Canada for the arrest, demanding her immediate release. Traders have quickly moved out of riskier assets reflecting nerves that the arrest is likely to escalate tensions between the US and China once again," said Jasper Lawler, head of research at London Capital Group.

The Huawei CFO was arrested in Vancouver, British Columbia, on Saturday, Justice Department spokesman Ian McLeod said. McLeod said a publication ban has been imposed in the case and he could not provide further details.

Huawei issued a statement saying Meng was changing flights in Canada when she was detained "on behalf of the US of America" to face "unspecified charges" in New York.

LCG's Lawler continued: "The timing of the arrest is key here. Markets are already incredibly nervous over slowing economic growth thanks to the inverted US yield curve. Relations between the US and China were supposed to be on the mend after a productive G20. However, the arrest has the potential to shatter very fragile US–Sino relations."

In Asia on Thursday, the Japanese Nikkei 225 index ended down 1.9%. In China, the Shanghai Composite closed down 1.7%, while the Hang Seng index in Hong Kong is down 2.7%.

Stock markets in the US were closed on Wednesday in honour of former US president George HW Bush and will re-open on Thursday.

In early UK company news, paper and packaging firm DS Smith said revenue and profit rose in its first half.

Revenue from continuing operations for the six months to the end of October rose 15% to GBP3.07 billion, as pretax profit jumped 27% to GBP162 million. The company said it saw good organic volume growth in the half of 3.2%.

DS Smith said its outlook remains positive as it enters the second half with "good momentum".

"The recovery of paper price increases that has been ongoing over the past 12 - 18 months is now completed. Our short-paper business model is robust and designed to deliver good returns throughout the paper cycle," said DS Smith.

The FTSE 100 constituent raised its interim dividend by 14% to 5.2p.

Fashion retailer Ted Baker said it produced a "resilient" performance in the sixteen weeks to December 1 despite tough trading conditions.

Revenue fell 0.2%, or 0.4% at constant currencies, in the period. This reflected an anticipated decline in wholesale sales due to the timing of deliveries, largely offset by its retail sales performance.

"In the UK, Europe and the east coast of America, trade was affected by the unseasonal weather at the start of the period and trading in the UK continues to be impacted by the well-publicised challenges facing some of our trading partners," said Ted Baker.

Total retail sales including e-commerce were up 2.3%, or 2.1% at constant currency, in the period. Total retail sales for the last eight weeks of the period grew 4.0% as the weather became more standard for the time of year.

The company also confirmed that it has appointed law firm Herbert Smith Freehills to conduct an independent external investigation, after Sky News reported of an "awkward hugging policy" at the company.

On Sunday, Sky News said that more than 60 people had come forward to launch an online petition, detailing alleged experiences with Ted Baker's founder & chief executive, Ray Kelvin. Ted Baker, in a statement to Sky News, said that it would make sure an independent investigation was carried out.

Beazley said its early estimate of costs arising from recent wildfires in California is USD40 million, net of reinsurance. The insurer added that investment markets continue to be volatile, and its year-to-date investment return is 0.5%.

Landlord Grainger said it has been shortlisted as one of three companies by Transport for London for a private rented sector partnership to deliver around 3,000 homes on 10 identified sites around tube stations.

The selection process will continue into 2019, with a decision expected in the spring.

ContourGlobal said it has reached an agreement to sell a 49% stake in its 250 megawatt concentrated solar power facilities in the southwest of Spain to a fund advised by Credit Suisse Energy Infrastructure Partners.

ContourGlobal will receive EUR134 million for the sale, marking a premium of EUR65 million to the company's proportionate net investment in the stake of EUR69 million. As part of the agreement, ContourGlobal will continue to manage, operate and maintain the five assets.

The deal is expected to close in the second quarter of 2019.

The company added that it remains comfortable with its annual adjusted earnings before interest, taxes, depreciation and amortisation guidance of USD600 million to USD630 million on a constant currency basis.

Euromoney Institutional Investor said it has agreed to buy BoardEx and The Deal for USD87.3 million from Nasdaq-listed TheStreet.

BoardEx is an executive profiling and relationship mapping platform, while The Deal provides data and news on mergers and acquisitions.

boohoo group said the Committee of Advertising Practice, sister organisation of the Advertising Standards Authority, will be taking no further action after the fashion retailer agreed to take the regulator's guidance regarding its promotions on board. boohoo said it will continue to review its promotional offers so they comply with regulations.

In other company news, FTSE Russell said late Wednesday that Royal Mail and Just Eat will be demoted from the FTSE 10, effective December 24.

Replacing the two in the blue-chip index will be Hiscox and Spirax-Sarco Engineering. Dropping out of the FTSE 250 will be Thomas Cook, after last week's profit warning, as well as private hospital operator Spire Healthcare, geotechnical services provider Keller, support services firm Kier and online travel agent On the Beach.

Entering the FTSE 250 is car maker Aston Martin Lagonda Global Holdings, peer-to-peer lender Funding Circle Holdings, and Smithson Investment Trust. Gold miner Acacia Mining, Woodford Patient Capital and retirement housebuilder McCarthy & Stone also will be making a return to the mid-cap index.

The economic events calendar on Thursday has US ADP employment data for November, which preludes Friday's closely-watched monthly jobs report, at 1315 GMT.

Oil ministers from some of the world's biggest petroleum producers meet on Thursday and Friday to discuss an output cut to bolster prices, as Middle Eastern tensions and US demands for cheap oil add a political dimension to the talks.

The Organization of the Petroleum Exporting Countries is mulling a reduction in the region of 1 million barrels per day, which would take about 1% of global supply off the market.

Together, the 25 so-called OPEC-plus countries have been implementing an output cap since early 2017. However, there has been a dramatic price drop from USD86 per barrel in October to below USD60 last week, triggering a move towards a further reduction.

However, there are rifts amongst some OPEC members. Qatar announced its exit from OPEC this week, while Iran has complained that Riyadh is colluding with Washington to enforce the US embargo on Iranian oil.

Brent oil was quoted at USD61.52 a barrel early Thursday, down from USD63.15 late Wednesday.

In the latest Brexit developments, UK Prime Minister Theresa May has been given a stark warning that her premiership could be ended if she ploughs ahead with her Brexit deal.

The Democratic Unionist Party, which props up May's administration, made clear it would support the government in a confidence motion if the Brexit deal was rejected by MPs on December 11.

But the party's 10 MPs would not back the prime minister if her Brexit deal, including the controversial Northern Ireland backstop measure, survives.

The DUP's position heaps further pressure on May ahead of the crunch vote on the Withdrawal Agreement and Political Declaration thrashed out after months of negotiations in Brussels.

Labour has indicated it will table a motion of no confidence in the prime minister in the wake of a defeat on such a pivotal issue for May.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2018 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Smith (DS) PLC 311.30 GBX -1.11 -
ContourGlobal PLC 165.00 GBX 1.23 -
Euromoney Institutional Investor PLC 1,172.00 GBX 1.21 -
Ted Baker PLC 1,473.00 GBX 0.75 -
Grainger PLC 212.60 GBX 1.33 -
Boohoo Group PLC 183.00 GBX -0.27 -
Beazley PLC 505.00 GBX -0.49 -
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