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LONDON MARKET PRE-OPEN: Imperial Brands CEO To Depart After Warning

(Alliance News) - London stocks are in for a further tumble on Thursday as another front on US ...

Alliance News 3 October, 2019 | 7:39AM
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(Alliance News) - London stocks are in for a further tumble on Thursday as another front on US President Donald Trump's trade war opened up, this time with the EU, compounding worries over weak economic data released from the US and Europe this week.

In early UK company news, tobacco major Imperial Brands announced plans for the departure of its chief executive, just a week after issuing a revenue warning. Upmarket fashion chain Ted Baker said its first-half results were below expectations amid a challenging retail backdrop.

IG says futures indicate the FTSE 100 index to open 35.54 points lower at 7,087.00 on Thursday. The London large-cap index closed down 237.78 points, or 3.2%, at 7,122.54 on Wednesday.

Stocks, which were already suffering this week from global growth worries following downbeat US manufacturing and jobs data, were hit further on Wednesday by news the World Trade Organization found subsidies provided by the EU to Airbus were illegal.

The ruling is the largest arbitration award in WTO history and a landmark moment the 15-year long Airbus-Boeing battle, which threatens to intensify already strained trade relations between the US and the EU.

Washington now has the go-ahead to slap tariffs on USD7.5 billion worth of EU goods. The EU immediately threatened to respond to any US move.

"With the global economic data continuing to deteriorate this new trade war front will stoke the recessionary fears to no end," commented Stephen Innes, market strategist at Axitrader.

In the US on Wednesday, Wall Street ended deeply in the red, with the Dow Jones Industrial Average closing down almost 500 points, or 1.9%, the S&P 500 down 1.8% and the Nasdaq Composite down 1.6%.

In Asia on Thursday, the Japanese Nikkei 225 index closed down 2.0%. Markets in China remain closed this week, though in Hong Kong, which re-opened on Wednesday, the Hang Seng is 0.6% lower.

In early UK company news, Imperial Brands revealed plans for the departure of its chief executive. The announcement comes just a week after the tobacco firm warned on its annual revenue.

Alison Cooper and the board have agreed that she will step down from her role once a suitable successor is found, Imperial said.

This news comes a week after the company cut its revenue guidance due to a challenging vaping and e-cigarette market in the US.

Imperial predicted net revenue growth for its financial year, which ended on Monday, will be 2%, slashing its previous 2.5% growth forecast.

Imperial noted that the US next-generation product environment had "deteriorated" over the last quarter in the wake of increased regulation, with Massachusetts last week temporarily banning the sale of all forms of e-cigarettes - the first state to enact an outright ban.

In another executive change, the boss of gold miner Centamin also intends to retire.

The nomination committee, chaired by Edward Haslam, is now initiating a search process to find a replacement for Andrew Pardey, who will remain in post while assisting the search process and facilitating an handover to his appointed successor, within his 12-month notice period.

The firm added that the lower end of its annual production guidance "remains achievable", having previously communicated that third quarter output was behind expectations due to reduced open pit mining rates on the higher-grade Stage 4 West wall of its Sukari mine in Egypt.

Stagecoach reaffirmed its annual guidance as it reported an in-line performance at its bus operations.

The public transport operator said it has been pleased by a strong performance in its London bus business, with a favourable service performance resulting in higher-than-anticipated "Quality Incentive Contract" income.

For the twenty weeks to September 14, like-for-like regional bus revenue growth was 1.0%, lower than anticipated.

"We continue to see regional variations in performance, with patronage trends typically strongest in urban areas and the southern half of the country," Stagecoach said.

Turning to its rail operations, Stagecoach said it is continuing to pursue claims against the UK secretary of state for transport regarding decisions to disqualify the firm from three rail franchise competitions. The three cases are due to be heard in the High Court in early 2020.

Ted Baker reported a "challenging" first half, marred by "unprecedented and sustained" levels of promotional activity across the sector.

Revenue for the 28 weeks to August 10 was down 0.7% at GBP303.8 million, with the company swinging to a pretax loss of GBP23.0 million from a GBP24.5 million profit a year ago.

Exceptional costs of GBP17.4 million were largely incurred as a result of actions taken to "strengthen the brand" and include GBP11.8 million in respect of restructuring the Asian businesses and GBP3.5 million related to a footwear acquisition at the start of 2019.

"The financial results we delivered in the first half were behind our expectations. Trading in the second half has started slowly, not helped by the unseasonably warm weather in September, and this will have an impact on the full year outcome," Ted Baker warned.

CMC Markets said net trading revenue for the six months to the end of September was "strong", with the spread-betting firm pleased with its interim performance.

The online trading platform said revenue for its stockbroking business is expected to increase to around GBP14 million for the half, more than double the GBP5.5 million generated a year ago. The contracts-for-difference unit generated client income "only slightly down" on last year.

Following the strong performance in the half year, CMC said it is confident that net operating income will exceed GBP170 million for the full-year, with pretax profit expected to increase.

"I am pleased with our first half performance. This time last year we had the uncertainty of regulatory change hanging over the sector and the uncertainty of how clients would react to the changes in minimum margin levels. A year on, we are seeing clients adapting to the new changes and still maintaining their interest in the products and the trading platforms we offer," said CMC Chief Executive Peter Cruddas

The economic events calendar on Thursday has services PMI readings from France, Germany, eurozone and the UK at 0850 BST, 0855 BST, 0900 BST and 0930 BST, respectively. There are also eurozone producer prices and retail sales figures at 1000 BST.

Markets in Germany are closed for the Day of Unity holiday.

In political news, Boris Johnson is preparing for 10 days of "intensive discussions" as he seeks backing from EU leaders for his Brexit blueprint.

The UK prime minister has said he wants to get an agreement in place for the EU summit on October 17, paving the way for Britain to leave with a deal at the end of the month.

With the agenda for such meetings generally set several days in advance, he acknowledged there was "very little time" left. So far, however, European leaders have reacted coolly to the plan, set out in a letter to European Commission president Jean-Claude Juncker on Wednesday, to resolve the issue of the Northern Ireland backstop.

Johnson said his plan, which would see Northern Ireland remain tied to EU single market rules for trade in goods while leaving the customs union with the rest of the UK, represented a "fair and reasonable compromise".

However both Juncker and Irish premier Leo Varadkar expressed concern the return of customs controls – however light-touch – threatened the guarantee under the Good Friday agreement to maintain an open border with the Republic.

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
Centamin PLC 113.30 GBX 0.00 -
CMC Markets PLC 127.00 GBX 0.00 -
Imperial Brands PLC 1,730.00 GBX -1.60
Ted Baker PLC 398.59 GBX -0.90 -
Stagecoach Group PLC 132.20 GBX -0.75 -

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