LONDON MARKET PRE-OPEN: Next Ups Guidance; BAT Gets Clarity On E-Cigs

(Alliance News) - Stock prices in London are seen opening lower on Friday as oil and safe-haven ...

Alliance News 3 January, 2020 | 7:49AM
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(Alliance News) - Stock prices in London are seen opening lower on Friday as oil and safe-haven assets surged overnight after an Iranian general was killed by the US military.

Balancing this was a positive Christmas trading update from bellwether home and fashion retailer Next, while cigarette company BAT welcomed US restrictions on vaping that were less severe than feared by the industry.

IG futures indicate the FTSE 100 index will open 28.06 points lower at 7,580.00. The FTSE 100 index closed up 65.62 points, or 0.9%, at 7,608.06 on Thursday, the first trading day in 2020.

In early UK company news, Next upped its annual profit guidance and said it expects further improvement in financial 2021 after fourth-quarter performance came in ahead of internal forecasts.

The FTSE 100-listed retailer reported that total full price sales - which include interest income - grew by 5.2% on a year before in the period from October 27 to December 28. Next said the result was 1.1% ahead of its internal forecasts.

"We believe our sales performance in the period was helped by a much colder November than last year and improved stock availability in both our Retail stores and Online," Next said in its statement Friday.

Therefore, Next increased its pretax profit guidance for the financial year to the end of January by GBP2 million to GBP727 million, which will represent a 0.6% growth on last year. Next said it expects full price sales growth of 3.9% in financial 2020, which is 0.3 percentage point ahead of its guidance given in October.

Irish budget carrier Ryanair said traffic in the month of December grew by 9% to 11.2 million passengers compared to 10.3 million carried a year earlier. For the year as a whole, the number of passengers it carried also increased by 9%, to 140.2 million.

British American Tobacco welcomed regulations announced on Thursday by the US Food & Drug Administration, saying they acknowledged that a properly regulated vapour category provides a credible alternative to smoking. However, the regulator addressed the important issue of preventing the access and appeal of vapour products to youth, BAT said.

The FDA said Thursday that cartridge-based e-cigarettes in flavours other than tobacco or menthol will become illegal unless specifically authorised by the government. BAT said this regulatory clarity is expected to return the US vapour market to stability, following a period of "disruption and uncertainty".

Back in September, some US states banned flavoured e-cigarettes, which have been available in the country since 2006, amid an outbreak of severe pulmonary disease that has killed seven people and sickened hundreds.

The move followed the announcement from US President Donald Trump's administration that it would soon ban flavoured e-cigarette products to stem a rising tide of youth users.

On Friday, BAT said the guidance from US FDA is clear that flavours can return to the market place once they have been cleared through the premarket tobacco application process.

PMTA is an application that must be reviewed and approved by the FDA before a new tobacco product can be legally marketed in the US.

"Our US subsidiary, RAI Group, has already submitted one brand PMTA for VUSE Solo and is well positioned to submit applications for the remaining VUSE portfolio ahead of the deadline of May 2020. We are confident that, as required by the PMTA process, all VUSE products will be shown to be appropriate for the protection of public health," said BAT Chief Executive Jack Bowles.

In the US on Thursday, Wall Street ended at new highs, with the Dow Jones Industrial Average up more than 300 points or 1.2%. The S&P 500 closed up 0.8% and the Nasdaq Composite up 1.3%.

Financial markets in Japan remain closed for the New Year's holiday. In China, the Shanghai Composite index ended down 0.1%, while the Hang Seng index in Hong Kong is down 0.4% in late trade.

"Overnight, stocks in Asia fell on the back of the news that an Iranian military commander was killed in Iraq by US airstrikes. Tensions in the region sent oil surging too," said CMC Markets UK Market Analyst David Madden.

Iran's Supreme Leader Ayatollah Ali Khamenei has threatened the US with "harsh retaliation" after the killing of influential Iranian General Qassem Soleimani, Iranian state television reported on Friday.

Soleimani is the Commander of Iran's Quds Force, a unit in the Iranian Revolutionary Guards. Soleimani's path would continue without him, but the perpetrators would face severe revenge, Khamenei said.

The Defense Department in Washington confirmed earlier that Soleimani was killed in an attack near Baghdad airport in the early hours of Friday, in what the US described as "defensive action" strikes.

Soleimani was killed along with with the deputy head of Iraq's powerful Shiite Hashd Shaabi militia, Abu Mahdi al-Mohandes, the group said.

Oil prices surged in response. Brent was trading at USD68.30 a barrel early Friday, up 3.9% from USD65.76 at the London equities close on Thursday.

Gold, traditionally a safe-haven investment, jumped to USD1,540.70 an ounce, up 0.8% from USD1,527.98 late Thursday.

"The US dollar rebounded yesterday, but in late December the currency dropped to a five month low, so bargain hunters entered the fold," added Madden.

Sterling was quoted at USD1.3108 early Friday, soft on USD1.3155 at the London equities close on Thursday.

In other currencies, the euro was trading at USD1.1157 early Friday, soft on USD1.1185 late Thursday. Against the yen, the dollar was at JPY108.03, down slightly from JPY108.33.

In UK economic news, house price growth decelerated in December, Nationwide reported. House prices in December grew 0.1% on November, after November had risen 0.5% on October.

On an annual basis however, house prices increased by 1.4%, accelerating from the 0.8% year-on-year rise recorded in November.

"Annual UK house price growth edged up as 2019 drew to a close, with prices 1.4% higher than December 2018, the first time it been above 1% for 12 months," said Nationwide Chief Economist Robert Gardner.

Looking at house prices regionally, London was the weakest performing region. Prices fell 1.8% in the last quarter of 2019 from a year before, with the outer south-east falling 1.0%.

All other regions of the UK posted a rise in house prices. Scotland was the strongest, at 2.8% year-on-year in the fourth quarter, with the West Midlands next with 2.7% and the North at 2.6%.

The economic events calendar on Friday has UK construction PMI at 0930 GMT.

By Evelina Grecenko; evelinagrecenko@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Rating
British American Tobacco PLC 2,856.50 GBX 3.53
Next PLC 3,702.00 GBX -9.09 -
Ryanair Holdings PLC 9.00 EUR -2.32 -

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