LONDON MARKET OPEN: Vodafone, Pearson Boost FTSE Ahead Of US GDP Data

(Alliance News) - The FTSE 100 sought to end the week on an upbeat note amid strong gains for ...

Alliance News 26 July, 2019 | 8:31AM
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(Alliance News) - The FTSE 100 sought to end the week on an upbeat note amid strong gains for Vodafone and Pearson as investors welcomed their respective earnings updates.

Focus in the day ahead, meanwhile, lies on a second quarter GDP reading from the US ahead of the Federal Reserve's meeting next week, where it is highly anticipated that the central bank will cut interest rates.

The large-cap FTSE 100 index was 12.36 points higher, or up 0.2%, at 7,501.41 early Friday. The mid-cap FTSE 250 index was just 3.30 points higher at 19,823.65, while the AIM All-Share was 0.1% higher at 927.20.

The Cboe UK 100 index was up 0.1% at 12,717.72. The Cboe UK 250 was down 0.1% at 17,713.85, while the Cboe UK Small Companies was flat at 11,052.24.

In Paris, the CAC 40 was up 0.8% while the DAX 30 in Frankfurt was up 0.3%.

"With attention now turning to next week's Fed meeting, the focus today will be on the US GDP data. However, it will take a major surprise from those to shift markets expectations that US rates will be cut next week," said Lloyds Banking.

"Today's first estimate of US Q2 GDP is forecast to show 1.8% annualised growth, down from 3.2% in Q1 and equal to the lowest quarterly growth rate since early 2016. That outturn may add to concerns that the US economy is losing momentum," said Lloyds.

US second quarter gross domestic product data are due at 1330 BST alongside personal consumption expenditure figures. According to the CME's FedWatch tool, a rate cut next week is 79% priced in by markets.

"Market sentiment will probably hinge simply on whether the consensus forecast of 1.8% US growth is eaten, or not," commented Kit Juckes of Societe Generale.

Educational publisher Pearson was up 7.7% after reporting underlying sales growth in the first half of the year and backing its annual guidance.

Underlying revenue was up 2% for the six months to June 30, with North America up 1%, Core up 6% and Growth up 2%.

Revenue was GBP1.83 billion for the half, down slightly from GBP1.87 billion a year ago. Pretax profit dropped sharply to GBP13 million from GBP202 million, largely because the company saw a net gain of GBP207 million in the first half of 2018, and only GBP6 million in the first six months of 2019.

Continued momentum in "structural growth opportunities" and stabilisation in other parts of the business more than offsets expected declines in US Higher Education Courseware and US Student Assessment.

Pearson raised its interim dividend to 6p from 5.5p.

Pearson said its annual guidance remains unchanged, expecting an adjusted operating profit of between GBP590 million to GBP640 million.

Vodafone was another gainer, up 5.5% after the telecommunications firm reported improving organic service revenue trends.

Vodafone said first quarter organic service revenue fell 0.2%, which the company pointed out was an improvement on the 0.7% fall seen in the fourth quarter.

Revenue was down 2.3% to EUR10.65 billion, with Europe down 2.1% and Rest of the World down 4.0%.

Trading in the first three months of the financial year was in line with expectations, allowing the company to back previous guidance.

"Our service revenue growth improved during the first quarter, led by Italy, and mobile churn fell to another record low. Following a significant quarter of commercial activity, we expect the gradual recovery in our service revenues to continue, underpinning our financial outlook for the year," said Chief Executive Nick Read.

The telecoms company also said that it will separate its European tower infrastructure business into a new company and seek either a stock listing, or the disposal of a minority stake, in the tower business, depending upon market conditions. Proceeds will be applied toward reducing Vodafone's debt.

Rightmove was up 2.9% as revenue rose in the first half of the year.

Revenue was up 10% in the first half to GBP143.9 million, with average revenue per advertiser growing more strongly than anticipated, up GBP90 on the same period a year ago to GBP1,077.

Pretax profit improved to GBP108.1 million from GBP98.1 million a year ago.

Meanwhile, housing transactions fell 4.6% year-on-year.

"A 4.6% drop in transactions compared to 2018 has put pressure on some low-stock agency branches and created opportunity for others. We're focused on helping all our customers succeed by delivering the most significant and effective exposure for their properties and brands to compete to win home sale instructions and also by being the largest source of high quality leads," said Chief Executive Peter Brooks-Johnson.

Separately, Rightmove said it has agreed to buy tenant referencing services firm Van Mildert for GBP16 million. Future deferred consideration is capped at GBP4 million.

In Asia on Friday, the Japanese Nikkei 225 index close down 0.5%. In China, the Shanghai Composite closed up 0.2%, while the Hang Seng index in Hong Kong is down 0.6% in late trade.

In the UK, Boris Johnson is making a series of further appointments to his government after dramatically reshaping the Cabinet.

The prime minister is using the reshuffle at Minister of State level to promote allies and clear out MPs who oppose his stance on Brexit.

But ardent Brexiteer Steve Baker said he had turned down a job in Johnson's new government. Baker had resigned as a junior Brexit minister under Theresa May and said he did not want to "repeat my experience of powerlessness" in office.

By Lucy Heming; lucyheming@alliancenews.com

Copyright 2019 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
Rightmove PLC 662.80 GBX -0.09 -
Pearson PLC 587.80 GBX -0.14
Vodafone Group PLC 155.42 GBX 0.67

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