(Alliance News) - Stock prices in London are seen opening lower on Friday tracking steep declines in Asian equity markets, as US government bond yields remain at elevated levels.
In early company news, the UK government reduced its holding in lender NatWest. JPMorgan placed shares in London Stock Exchange Group. Pub chain JD Wetherspoon swung to an interim loss and continued to hit out at lockdown restrictions.
IG futures indicate the FTSE 100 index is to open 64.68 points lower at 6,715.00. The blue-chip index closed up 17.01 points, or 0.3%, at 6,779.68 Thursday.
The UK government cut its stake in NatWest to 59.8% from 61.7%.
NatWest said it agreed with the Treasury to make an off-market purchase of 590.7 million shares from UK Government Investments at Thursday's closing market price of 190.50 pence per share, worth GBP1.12 billion. The UK government now holds 6.92 billion NatWest shares.
NatWest said it plans to cancel 390.7 million of UK government shares and hold the remaining 200 million in treasury.
NatWest said the off-market purchase of shares required it to contribute GBP500 million to its main pension scheme, under an agreement announced back in 2018. After tax relief, the contribution will reduce tangible equity by GBP365 million, the bank said, of which GBP99 million will be cut from its CET1 ratio.
As result of the share purchase and pension contribution, NatWest said its CET1 ratio as at December 31 will be reduced by 72 basis points.
In another large share transaction, JP Morgan said it has placed 10.4 million London Stock Exchange Group shares at 7,150 pence each, in a deal worth GBP745 million. The placing was of existing shares held Thomson Reuters and Refinitiv management, and LSEG received no proceeds.
Following completion of the placing, the sellers will own in aggregate around 30% economic interest and 22% voting interest in LSEG.
JD Wetherpoon swung to an interim loss as pub closures due to tight UK restrictions continued to frustrate the company.
For the half year ended January 24, JD Wetherspoon swung to GBP61.4 million pretax loss from a GBP42.0 million profit the year before on revenue of GBP431.1 million, down 54% from GBP933.0 million.
JD Wetherspoon said it was not recommending interim dividend "in current circumstances", as the company complained bitterly about having to cope with Covid-19 rules with "no real basis in common sense or science".
Chair Tim Martin said: "Wetherspoon recorded over 50 million customer visits to its pubs from reopening in July, to the year end, and there has been no evidence of even a single outbreak, as defined by the health authorities, during this time.
"The main problem is that the government and SAGE have been unscientific in their approach- ignoring evidence, such as the evidence above, which contradicts their 'narrative'."
He added: "The future of the industry, and of the UK economy, depends on a consistent set of sensible policies, based on scientific evidence, rather than on political expediency.
Widened bond yields remained a concern for markets early Friday.
The 10-year US Treasury yield stood at 1.69% on Friday morning, narrowing from 1.72% at the same time on Thursday, but had jumped above 1.75% at its high on Thursday, reaching its highest level since January 2020. This was after the US Federal Reserve expressed its willingness to allow an overshoot in inflation.
In the US on Thursday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.5%, S&P 500 down 1.5% and Nasdaq Composite down 3.0%.
The Japanese Nikkei 225 index closed down 1.4%. In China, the Shanghai Composite ended down 1.7%, while the Hang Seng index in Hong Kong was down 2.3%. The S&P/ASX 200 in Sydney ended 0.6% lower.
The Bank of Japan on Friday maintained its negative interest rate and tweaked its monetary easing programme as it battles to boost inflation and shore up the pandemic-hit economy.
The adjustment, which marginally expands the fluctuation in long-term rates for 10-year bonds that the bank will accept, is seen as a potential forerunner to further tweaks in policy.
The central bank said the range of 10-year government bond yield fluctuation would be "between around plus and minus 0.25%" from the target level in order to conduct yield curve control flexibly.
The BoJ's policies were left untouched after its two-day meeting, with an interest rate of negative 0.1% left intact, as well as an annual ceiling on stock purchases.
"Traders in Asia were spooked by the declines seen in the US, hence the selling pressure in the Far East. The Bank of Japan made a reference that the ETF purchase programme will only focus on Topix-linked ETFs, which hurt the Nikkei. European stocks are set to open lower," CMC Markets analyst David Madden commented.
Elsewhere, US and Chinese diplomats clashed Thursday in their first face-to-face talks since President Joe Biden took office, with the world's top two powers each digging in on a laundry list of issues on which they diverge broadly as the meeting opened in Alaska.
China's actions "threaten the rules-based order that maintains global stability," US Secretary of State Antony Blinken said at the opening of the two-day meeting in Anchorage.
The US side will "discuss our deep concerns with actions by China, including Xinjiang," where Washington has accused Beijing of "genocide" against Uyghur Muslims, Blinken told the Chinese Communist Party's top diplomacy official, Yang Jiechi, and Foreign Minister Wang Yi.
He added that there would be dialogue on "Hong Kong, Taiwan, cyberattacks on the US, economic coercion toward our allies."
The pound was quoted at USD1.3920 on Friday morning, down from USD1.3949 at the London equity market close on Thursday.
The euro was priced at USD1.1921, down from USD1.1935. Against the yen, the dollar was trading at JPY108.80, lower from JPY108.95.
Brent oil was quoted at USD62.37 a barrel on Friday morning, down sharply from USD65.14 late Thursday. Gold was priced at USD1,741.05 an ounce, up from USD1,735.34.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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