(Alliance News) - Stock prices in London are set to slump at the open on Thursday, following Wall Street's tumble overnight, after a report showed US inflation in April hit its highest level since 2008.
In early UK company news, Burberry reported a fall in full-year revenue but improving trends into the end of the year. BT's annual revenue and profit fell. Hargreaves Lansdown saw a strong period for revenue and client growth.
IG says futures indicate the FTSE 100 index of large-caps to open 51.03 points, or 0.7%, lower at 6,953.60 on Thursday. The FTSE 100 closed up 56.64 points, or 0.8%, at 7,004.63 on Wednesday.
"As a result of the accelerated sell-off in the US after Europe had closed, we can expect to see European markets give back some of yesterday's gains as we look to open lower, while markets in Asia have also seen more big falls today," said Michael Hewson at CMC Markets.
In New York on Wednesday, the Dow Jones Industrial Average ending down 2.0%, the S&P 500 down 2.1%, and the Nasdaq Composite down 2.7%.
Hewson said: "The jump in US headline CPI to 4.2%, the biggest rise seen since 2008, was the catalyst for another big day of losses for US stocks with the Russell 2000 and the Nasdaq once again leading the way."
The annual rise in the US consumer price index for April had been expected to come in at 3.6%, with the actual reading of 4.2% not only beating forecasts but also marking a sharp acceleration from 2.6% in March.
The larger-than-expected spike in US inflation last month "surprised" Federal Reserve Vice Chair Richard Clarida, but he said Wednesday the central bank is ready to act if needed to contain prices.
However, the Fed continues to believe the sharp price increases over the past two months are due to the rebound following the unprecedented shock inflicted by the Covid-19 pandemic and will not last, he said.
Markets may face a further inflationary test as US producer prices are due to be released on Thursday at 1330 BST. The year-on-year rate is expected to accelerate to 5.9% for April from 4.2% in March, according to FXStreet.
Due at the same time are the latest initial weekly jobless claims numbers, expected to fall to 490,000 from 498,000.
The dollar was mostly higher ahead of the data.
Sterling was quoted at USD1.4047 early Thursday, down from USD1.4104 at the London equities close on Wednesday.
The euro traded at USD1.2091 early Thursday, up against USD1.2075 late Wednesday. Against the yen, the dollar rose to JPY109.63 versus JPY109.45.
In early UK company news, Rolls-Royce said trading has been in line with expectations and it still anticipates turning free cash flow positive "at some point" in the second half of 2021.
In the first four months of 2021 large engine flying hours were around 40% of 2019 levels, supported by demand for cargo flights and the maintenance of key routes, said the jet engine maker said ahead of its annual general meeting. This is broadly unchanged from the run rate at the end of 2020 and consistent with planning assumptions.
While the outlook is uncertain, the firm said vaccination programmes, particularly in the US and UK are "encouraging".
Rolls-Royce added that it has made good progress on its targeted GBP1.3 billion of annualised cost savings, and has an "encouraging range" of interested parties for the sale of its ITP Aero business in Spain.
Burberry reported a recovery into the end of its financial year as it brought its payout back to pre-pandemic levels.
Revenue for the year to March 27 fell 11% to GBP2.34 billion from GBP2.63 billion but, as a result of net operating expenses being cut by 25% to GBP1.14 billion from GBP1.52 billion, pretax profit nearly tripled GBP490.2 million from GBP168.5 million.
The fall in revenue, which was down 10% at constant exchange rates, was due to store closures and reduced tourism, Burberry said, though with a strong recovery in the second half.
The luxury fashion brand said its recovery accelerated through the year, leading to fourth-quarter comparable store sales rising 32% year-on-year, and down 5% on two years ago, even with an average of 16% of stores being closed.
Burberry declared a full-year dividend at the financial 2019 level of 42.5p on the back of strong cash generation with the progressive policy reinstated. This compares to just an interim dividend of 11.3p paid out for the 2020 financial year.
Looking ahead, it said: "Taking FY20 as the base year, we expect revenue to grow at a high single-digit percentage compound annual growth rate at FY21 CER in the medium term. This will be underpinned by the continued outperformance of full-price sales. We will continue to strengthen brand equity by exiting markdowns in mainline stores in FY22."
Telecommunications provider BT reported a fall in revenue and profit and expects payouts to resume in the financial year ahead.
Revenue for the financial year that ended March 31 fell 7% to GBP21.33 billion, with pretax profit falling 23% to GBP1.80 billion. The revenue slide was due to a Covid hit to its consumer and enterprise units, ongoing legacy product declines, and divestments.
BT paid no dividend for the recent year, but expects payments to resume at an annual rate of 7.7p per share in the 2022 financial year.
The outlook for 2022 sees adjusted revenue broadly flat year-on-year and adjusted earnings before interest, taxes, depreciation and amortisation between GBP7.5 billion to GBP7.7 billion. This compares to GBP7.42 billion for the recently ended year.
BT separately said it has decided that the "conditions are right" to increase and accelerate Openreach's total fibre-to-the-premises build to 25 million premises from 20 million by December 2026. Openreach will start its ramp up to 4 million premises a year with immediate effect.
"BT believes it could deliver further shareholder value by funding the additional 5 million premises through a joint venture with external parties and will explore joint venture structures over the first half of the current financial year," the firm said.
BT has also agreed on a pension valuation with the BT Pension Scheme. The funding deficit at June 30, 2020 has been agreed at GBP7.98 billion, broadly in line with the projected position from 2017 when the deficit was GBP11.3 billion.
Fund supermarket Hargreaves Lansdown reported a period of "very strong growth" with record net new business and client growth.
Net new business in the four months to April 30 was GBP4.6 billion, with assets under administration of GBP132.9 billion at the end of the period, up 28% in the year-to-date. Revenue for the period was GBP233.2 million, bringing the year-to-date total to GBP532.7 million, up 19% on a year before.
Net new clients for the period were 126,000, taking total active client numbers to 1.6 million.
"Where daily share dealing volumes settle, as we ease out of lockdown and life returns to more normal, is difficult to say. Similar to when previous lockdowns have been lifted, we have begun to see a reduction in share dealing volumes in both UK and overseas trades. However...we are confident that we will see a higher base level of dealing volumes than we did pre Covid-19," the company said.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 2.5%. In China, the Shanghai Composite was down 1.1%, while the Hang Seng index in Hong Kong was down 1.3%. The S&P/ASX 200 in Sydney ended down 0.9%.
Gold was quoted at USD1,820.28 an ounce early Thursday, lower than USD1,825.25 on Wednesday.
Brent oil was trading at USD68.45 a barrel, falling from USD69.77 late Wednesday. The major US pipeline network forced offline by a cyber attack began to reopen Wednesday, its operator said, after a five-day shutdown prompted motorists to frantically stock up on gasoline and some gas stations on the US east coast to close.
But Colonial Pipeline warned that it will take "several days" before supplies return to normal.
The restoration of supplies will come as a relief to motorists who drove a wave of panic buying that caused the thousands of stations to run dry, according to GasBuddy. US average gasoline prices topped USD3 a gallon for the first time since November 2014, according to the American Automobile Association.
By Lucy Heming; lucyheming@alliancenews.com
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