(Alliance News) - Stocks in London are set for a strong start to Wednesday's session on vaccine optimism, with the pound firm ahead of the UK budget at midday.
In early UK company news, housebuilder Persimmon reported a fall in profit for 2020 and said it is targeting a return to pre-pandemic levels of new home completions in 2022, while insurer Hiscox swung to a loss last year on Covid-related claims and waste management firm Biffa raised its full-year outlook.
IG says futures indicate the FTSE 100 index of large-caps to open 52.35 points higher, or up 0.8%, at 6,666.10 on Wednesday. The FTSE 100 closed up 25.22 points, or 0.4%, at 6,613.75 on Tuesday.
"The prospects for a rapid recovery in US consumer spending are increasing after the White House announced on Tuesday that it would have enough vaccines for every adult by the end of May, two months earlier than previously reported," said Stephen Innes, chief global markets strategist at Axi.
US President Joe Biden said Tuesday the country would have sufficient vaccine supply by the end of May to inoculate the US adult population.
"We're now on track to have enough vaccine supply for every adult in America by the end of May," said Biden – who last month had forecast it would take until the end of July to amass that many doses.
"That's progress. Important progress. But it is not enough to have the vaccine supply," Biden said. "We need vaccinators, people who put the shots in people's arms, millions of Americans' arms."
In the US on Tuesday, Wall Street ended in the red, with the Dow Jones Industrial Average ending down 0.5%, the S&P 500 down 0.8% and Nasdaq Composite closing 1.7% lower. Futures currently point to a rebound in Wednesday's session in New York, however.
In focus in the UK on Wednesday is Chancellor Rishi Sunak's budget statement at around 1230 GMT.
He is set to announce an extension of the furlough scheme to the end of September, with employers asked to contribute to workers' salaries from July. That month, employers will be expected to contribute 10%, increasing to 20% in August and September, as the economy reopens. Employees will continue to receive 80% of their salary for hours not worked until the scheme ends.
The chancellor also will announce further support for self-employed workers, with more than 600,000 people – many of whom become self-employed in 2019-20 – now eligible for cash grants.
The chancellor will pledge to use "fiscal firepower" to protect jobs and livelihoods, vowing to do "whatever it takes" to help businesses and people through this "moment of crisis".
Sterling was quoted at USD1.3983 early Wednesday ahead of the budget, higher than USD1.3946 at the London equities close on Tuesday.
The euro traded at USD1.2093 early Wednesday, firm on USD1.2072 late Tuesday.
In early UK company news, housebuilder Persimmon reported a decline in profit for 2020 amid disruption in the second quarter due to the pandemic.
Revenue for 2020 fell to GBP3.33 billion from GBP3.65 billion in 2019, with pretax profit dropping to GBP783.8 million from GBP1.04 billion. New home completions fell to 13,575 from 15,855, though the average selling price rose to GBP230,534 from GBP215,709.
The FTSE 100 constituent described the performance as "resilient", given the disruption caused by the pandemic.
Looking ahead, Persimmon said its average private weekly sales rates for the first eight weeks of 2021 was 7% ahead of last year and build rates have been maintained at pre-pandemic levels since July.
"We are targeting a full return to 2019 levels of new home completions in 2022. From 2023, with a stable market, we expect our enhanced quality, service and efficiency capabilities to provide the opportunity to grow further. We are focused on bringing more outlets into production to support these targets," said Persimmon.
Cyber security firm Avast reported billings growth and raised its payout.
Adjusted billings for 2020 rose 1.2% to USD922.0 million, up 7.1% on an organic basis. Revenue rose 2.5% to USD892.9 million, while pretax profit slipped 25% to USD236.3, with the firm booking an 'other' finance expense of USD64.0 million versus income of USD9.7 million the year before.
Adjusted earnings before interest, taxes, depreciation and amortisation rose 2.6% to USD495.5 million.
"Underpinned by a strong prior year billings performance, we expect to deliver FY 2021 organic revenue growth in the range of 6% to 8%," said Avast. This compares to organic growth of 7.9% for 2020.
The company proposed a final dividend of 11.2 cents per share, bringing the total dividend for the year to 16.0 cents, up 8.8%.
Packaging company DS Smith said trading continues to progress well, with momentum continuing into the second half of its financial year.
Group like-for-like corrugated box volume growth has accelerated compared to the second quarter, with e-commerce and fast-moving consumer goods strength over Christmas continuing into 2021 together with some "encouraging signs" of recovery from industrial customers.
"While the economic environment remains uncertain due to Covid-19, we are experiencing good momentum across the business in both Europe and North America. We are confident in delivering results in line with our expectations for the year and showing further good progress and momentum as we move into the next financial year," said Chief Executive Miles Roberts.
Insurer Hiscox reported a swing to loss for 2020 though noted a hardening of market rates.
Gross premiums written were broadly flat at USD4.03 billion, with net premiums earnings rising to USD2.75 billion from USD2.64 billion. However, the firm swung to a pretax loss of USD268.5 million from a USD53.1 million profit in 2019.
Hiscox said it expects to pay USD475 million in Covid-related claims net of reinsurance, the majority for event cancellation and the remaining for business interruption and other claims.
"These are large sums and disappointingly means that we will make a pre-tax loss for the year of USD268 million. Without Covid-19 we would have produced a profit of USD207 million," the firm said.
Nonetheless, Hiscox said the challenges of the pandemic have not "withered the green shoots" of a hardening market. The company noted that rates are rising across all three of its business areas.
Waste management company Biffa said its performance in the second half has continued to be ahead of its base case expectations, with the third lockdown hitting earnings less severely than originally anticipated.
Underlying Ebit for the financial year ended March 26 is expected to be "well ahead" of the board's previous expectations, in the range of GBP42 million to GBP44 million. Biffa noted that consensus stands at GBP33.8 million.
In Asia on Wednesday, the Japanese Nikkei 225 index closed up 0.5%. Against the yen, the dollar was quoted at JPY106.82 versus JPY106.73.
In China, the Shanghai Composite closed up 2.0%, while the Hang Seng index in Hong Kong is up 2.7%.
Growth in China's service sector continued to slow in February, with a weaker rise in new business, and a fresh decline in new export work, data from Caixin and IHS Markit showed on Wednesday.
The headline seasonally adjusted business activity index dipped to 51.5 index points in February from 52.0 points in January, reflecting a consecutive loss in momentum since November.
Looking ahead, business confidence regarding the 12-month outlook for activity remains strong, on hopes that the Covid-19 pandemic will come to an end, as well as planned company expansions and new product releases.
On Monday, Caixin said the manufacturing PMI fell to 50.9 points in February from 51.5 in February, also due to a slower rise in output. As a result of this and the services sector, the composite output index dipped to 51.7 points from 52.2 in January.
Gold was quoted at USD1,733.63 an ounce early Wednesday, higher than USD1,727.95 on Tuesday. Brent oil was trading at USD63.05 a barrel, down from USD63.64 late Tuesday.
The economic calendar on Wednesday has a raft of services PMIs, including Germany at 0855 GMT, the eurozone and 0900 GMT and the UK at 0930 GMT. The US ADP employment report is at 1315 GMT.
By Lucy Heming; lucyheming@alliancenews.com
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