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LONDON MARKET OPEN: FTSE Rises Despite Pearson, Imperial Brands, IAG

(Alliance News) - The FTSE 100 started Thursday's session on the front foot despite drags from ...

Alliance News 26 September, 2019 | 8:33AM
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(Alliance News) - The FTSE 100 started Thursday's session on the front foot despite drags from Pearson, Imperial Brands and International Consolidated Airlines, bunched at the bottom of the index following downbeat trading updates.

The FTSE 100 index was up 20.28 points, or 0.3%, at 7,310.27 early Thursday. The FTSE 250 was up 41.58 points, or 0.2%, at 19,816.50. The AIM All-Share was flat at 874.40.

The Cboe UK 100 index was up 0.4% at 12,403.89. The Cboe UK 250 was up 0.2% at 17,719.57 and the Cboe UK Small Companies down 0.2% at 10,836.36.

In mainland Europe, the CAC 40 in Paris was down 0.1%, while the DAX 30 in Frankfurt was flat in early trade.

"There has been some improvement in risk appetite following more congenial comments from President Trump on trade deal prospects with China," commented Lloyds Banking.

Meanwhile, UK politics "remains the centre of attention" for sterling.

"While the pound was initially lifted by the Supreme Court ruling, it has settled lower again on market perceptions that uncertainties about outcomes remain high and all possibilities are still on the table," said Lloyds.

In the UK, Prime Minister Boris Johnson was forced back to Westminster on Wednesday, cutting short his visit to the United Nations General Assembly in New York, after the Supreme Court ruled his five-week suspension of Parliament was illegal.

As the House of Commons resumed, there was was uproar as the prime minister repeatedly berated MPs, rejected calls to temper his language and said the best way to honour murdered parliamentarian Jo Cox – an ardent Remainer – was to "get Brexit done".

The government will ask MPs on Thursday to agree to a three-day break for the Commons next week while the Tories stage their annual party conference in Manchester. But amid the angry mood at Westminster, the opposition parties appear unlikely to agree, meaning Johnson could be forced to rearrange his keynote speech due to be held on the final day on Wednesday.

Sterling was quoted at USD1.2355 early Thursday, flat on USD1.2360 at the London equities close on Wednesday. On Wednesday morning, the pound had been trading up near USD1.2470.

The FTSE 100 managed to start the day on a positive note despite some significant share price losses for Pearson, Imperial Brands and International Consolidated Airlines.

Pearson was the worst large-cap loser in opening trade, down 12%.

The educational publisher said it expects annual profit at the bottom of its guided range.

Pearson said it continues to expect revenue to stabilise this year, but weaker than expected trading in the US Higher Education Courseware business in its key selling season means adjusted operating profit is now expected to be at the bottom of the company's GBP590 million to GBP640 million guided range.

"The third quarter has been significantly weaker than we expected in US Higher Education Courseware. Whilst difficult in the short term this places more importance on our work to remake this part of Pearson and we are exploring new ways of deploying our new technology platform so that we can offer students highly affordable, convenient, adaptive, digital courseware," said Chief Executive John Fallon.

Not far behind was Imperial Brands, down 9.8% as it reported a challenging vaping market in the US.

Imperial Brands said it expects net revenue for its financial year ending on Monday to grow around 2%. Earnings per share is expected to be "broadly flat" at constant currency.

This is due to a "challenging" next-generation product market in the US and "changes to our results expectations" in the Africa, Asia and Australasia division.

Imperial Brands expects its NGP business to grow net revenue by around 50% this year, which would be below expectations. The NGP environment in the US has "deteriorated considerably" over the last quarter, with an increasing number of wholesalers and retailers not ordering or not allowing promotion of vaping products.

"Whilst this is disappointing for the current year, we believe that NGP provides a significant opportunity to deliver additive growth to complement our Tobacco business. We continue to refine our investment behind building a strong and profitable NGP business in a rapidly evolving market," said Imperial Brands.

Massachusetts this week officially became the first US state to ban – if temporarily – the sale of all electronic cigarettes, going further than states that only prohibited flavoured products. On Wednesday, US tobacco giants Philip Morris International and Altria Group said they had ended merger discussions, partly due to challenges to the e-cigarette market.

Further, vaping firm Juul Labs - in which Altria holds a 35% - on Wednesday decided to suspend advertising in the US and replaced its CEO with an Altria executive.

Peer British American Tobacco was down 4.5% in a negative read-across from Imperial Brands's update.

British Airways owner International Consolidated Airlines dipped 2.8% after revealing a hit from recent strike action.

IAG expects to take a EUR137 million hit from strikes at British Airways, with "further disruption events", included including threatened strikes by Heathrow Airport employees, to see the airline group book a further EUR33 million charge.

In addition, IAG said that the latest booking trends in its low-cost airlines, primarily Vueling and Level, should result in a EUR45 million hit.

Overall, IAG expects operating profit before exceptional items in 2019 to be EUR215 million lower than the EUR3.49 billion achieved in 2019. Passenger unit revenue is expected to be slightly down at constant currency, compared to flat guidance previously.

There have been no further talks between British Airways and pilots' union BALPA.

"The airline's offer of a 11.5% pay increase over three years still stands and has been accepted by British Airways' other unions, representing 90% of the airline's employees. Clearly any further industrial action will additionally impact IAG's full-year 2019 operating profit," IAG said.

To come in Thursday's corporate calendar, dual-listed cruise line Carnival is expected to report third-quarter results in the afternoon at 1500 BST.

In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.1%. In China, the Shanghai Composite ended down 0.9%, while the Hang Seng index in Hong Kong was flat in late trade.

The economic events calendar on Thursday has US second-quarter GDP readings and quarterly personal consumption expenditure prices at 1330 BST.

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
Pearson PLC 686.60 GBX -0.23
British American Tobacco PLC 2,900.00 GBX -0.17
Imperial Brands PLC 1,758.20 GBX -0.23
International Consolidated Airlines Group SA 542.20 GBX 0.48 -

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