(Alliance News) - Stocks in London are set for a recovery on Tuesday after a lacklustre start to the week, with focus in the morning on UK unemployment data, after UK Prime Minister Boris Johnson laid out his roadmap to exit lockdown in England.
The UK jobless rate edged up a touch but the labour market showed some encouraging signs of stabilisation.
Meanwhile, in company news, Standard Life Aberdeen said it will sell the 'Standard Life' brand to Phoenix Group, and InterContinental Hotels Group swung to a loss for 2020. Earlier in the morning, HSBC had reported a 34% drop in profit in 2020.
IG says futures indicate the FTSE 100 index of large-caps to open 25.86 points higher, up 0.4%, at 6,638.10 on Tuesday. The FTSE 100 closed down 11.78 points, or 0.2%, at 6,612.24 on Monday.
"Today's European open is likely to see a little bit of a rebound after the declines from yesterday, helped by a positive Asia session, and while optimism abounds about an economic recovery, there still seems to be an abundance of caution about when to look at becoming strongly positive about the prospects for UK and European stocks," said Michael Hewson at CMC Markets.
"Fresh from the optimism about an economic reopening roadmap for the UK economy, we get the latest ILO measure of unemployment for December."
Johnson said spring and summer in England will usher in changes to make lives "incomparably better", as he set out a plan to fully ease the lockdown by June 21.
The prime minister defended his "cautious but also irreversible" approach to relaxing restrictions with a four-step plan on Monday, arguing he will not be "buccaneering" with people's lives. But despite billing his plans as a "one-way road to freedom", he admitted he cannot guarantee that the vaccination programme will prevent restrictions from ever returning.
Chancellor Rishi Sunak is under pressure to extend measures such as the furlough scheme, which is due to expire at the end of April, when he delivers his government budget on March 3.
Against this, figures on Tuesday showed the UK unemployment rate edged up in the three months to December, as expected.
Figures from the Office for National Statistics on Tuesday showed the UK unemployment rate nudged up to 5.1% for the final three months of 2020 from 5.0% in the three months to November, and was 1.3 percentage points higher than a year ago.
CMC's Hewson noted: "Projections for unemployment are set to rise to 7.5% by the summer, especially if furlough isn't extended beyond the current deadline of April in the budget next week."
More positively, the ONS noted that the claimant count - the number of people claiming unemployment benefits - decreased slightly in January, down 0.8% on the month before to 2.6 million. Still, this was double March 2020's level. Also in January, 83,000 more people were in payrolled employment when compared with December - the second consecutive monthly increase - but 726,000 fewer people were in employment when compared with February 2020.
The pound was holding firm above the USD1.40 mark after the UK jobs data. Sterling was quoted at USD1.4066 early Tuesday compared to USD1.4060 at the London equities close on Monday.
Also in the economic calendar on Tuesday is eurozone inflation at 1000 GMT. The euro traded at USD1.2171 early Tuesday, edging up from USD1.2145 late Monday.
In early UK company news, FTSE 100-listed investment and asset management company Standard Life Aberdeen said it has simplified and extended its strategic partnership with Phoenix Group Holdings.
The strategic asset management partnership - under which Standard Life Aberdeen currently manages around GBP147.4 billion of Phoenix Group assets - will be extended and will now operate until at least 2031.
Standard Life Aberdeen will buy the Wrap SIPP and Wrap Onshore Bond businesses from Phoenix, to bolster its offering for its UK financial adviser clients in the form of its Wrap and Elevate platforms, and will also acquire the TIP business from Phoenix - the upfront cost of all this being GBP62.5 million, though this is expected to be offset in part by expected payments from Phoenix relating to the profits of the business prior to completion of the legal transfer.
Meanwhile, Standard Life Aberdeen will sell the 'Standard Life' brand to Phoenix Group during the course of 2021. Standard Life Aberdeen has initiated a branding review, the outcome of which it will announce later this year.
"The 'Standard Life' brand has an important heritage. In the UK, it has strong recognition as a life insurance and workplace pensions brand. This is closely aligned with Phoenix's strategy and customer base. This is much less the case with the business we are building at Standard Life Aberdeen, which is focused on global asset management, our market-leading platforms offerings to UK financial advisers and their customers, and our UK savings and wealth businesses," said Standard Life Aberdeen Chief Executive Stephen Bird
"That's why I am excited about the work we are doing on our own brand, which we look forward to sharing later this year."
InterContinental Hotels Group posted a swing to loss for 2020, a year in which the hospitality industry was hammered by coronavirus restrictions across the globe.
Total revenue for 2020 slumped 48% to USD2.39 billion from USD4.63 billion, with the company swinging to a pretax loss of USD280 million from a USD542 profit in 2019.
RevPAR - revenue per available room, a key metric in the hotels industry - fell 53%, though IHG noted the variation by region reflected local market Covid-19 restrictions and recovery pace. Greater China's recovery was most advanced, with fourth quarter RevPAR down 18%, while the Americas was down 50% and Europe, the Middle East & Africa down 71%.
"The shape of recovery remains varied globally, but we've continued to outperform the industry in key markets thanks to the strength of our teams, business model and segments in which we compete. This includes our industry-leading position in upper midscale, where demand remains stronger," said Chief Executive Keith Barr.
IHG proposed no final dividend for 2020 and did not pay out anything at the interim stage, though the FTSE 100 constituent said it will consider future dividends once visibility over the pace and scale of market recovery has improved. In 2019, IHG paid out 39.9 cents per share.
In the US on Monday, Wall Street ended mostly lower, with the Dow Jones Industrial Average ending up 0.1%, the S&P 500 down 0.8% and Nasdaq Composite closing 2.5% lower.
In Japan, financial markets are shut for the Emperor's Birthday holiday. Against the yen, the dollar was quoted at JPY105.16 versus JPY105.07.
In China, the Shanghai Composite closed down 0.2%, while the Hang Seng index in Hong Kong is up 1.0%.
Shares in HSBC were up 0.5% in Hong Kong after the bank reported a sharp drop in profit in 2020 but offered some "cautious optimism" going forward.
For 2020, the China-focused lender saw its pretax profit drop to USD8.78 billion from USD13.35 billion in 2019. The 34% fall was blamed on higher expected credit losses and other credit impairment charges and lower revenue. Despite the sharp drop, HSBC's pretax profit came in ahead of market consensus, which forecast the figure at USD8.33 billion.
Net operating income plunged 21% to USD41.55 billion from USD52.31 billion, as net interest income fell 9.5% to USD27.58 billion from USD30.46 billion and net fee income slipped 1.2% to USD11.87 billion from UDS12.02 billion. Market consensus had forecast net operating income at USD50.04 billion, while net interest income was predicted at USD27.23 billion.
Looking ahead, HSBC said it recognises a number of "fundamental changes", including the prospect of prolonged low interest rates, the significant increase in digital engagement from customers, and the enhanced focus on the environment. As a result, the lender said it has "aligned its strategy accordingly".
The bank noted it had a "good start" to 2021, and is "cautiously optimistic" for the year ahead.
Gold was quoted at USD1,810.22 an ounce early Tuesday, flat on USD1,810.01 on Monday. Brent oil was trading at USD66.13 a barrel, higher than USD64.45 late Monday and trading above the USD66 mark for the first time in just over a year.
"The positive momentum continues in the oil complex, with investors unabashedly predisposed to a bullish view. So, the unwinding of the Texas cold snap effect and the prospects of some delicate negotiation ahead of the next OPEC+ meetings in early March are imparting little influence on price and giving way to the anticipated commodity reflation effect of Democrats pushing Biden's USD1.9 trillion stimulus through reconciliation and positive vaccine headlines," said Stephen Innes, chief global markets strategist at Axi.
By Lucy Heming; lucyheming@alliancenews.com
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