(Alliance News) - Stock prices in London are seen opening higher on Monday, with traders shaking off economic and inflationary concerns and taking confidence from improved investor sentiment as the Asia session draws to a close.
IG futures indicate the FTSE 100 index is to open 26.5 points, 0.4%, higher at 7,055.70 on Monday. London's blue-chip index closed up 4.99 points, 0.1%, at 7,029.20 on Friday.
AvaTrade analyst Naeem Aslam cautioned: "Investors should keep in mind that stock markets have posted double-digit growth on a percentage basis, but the rising repercussions caused by the coronavirus could likely dent economic growth. The continuous rise in Covid cases, despite the vaccination rollout, has curbed confidence among Americans and has contributed to supply-side inflationary pressures. Furthermore, central banks around the globe are coming closer to withdrawing their pandemic era stimulus, which would add to the already existing uncertainty in the financial markets."
In early corporate news in London, Associated British Foods said both its food units and its Primark retail business topped profit expectations in the fourth quarter, despite being hit by the 'pingdemic' in the UK. Babcock and Rolls-Royce will sell their stakes in an aviation asset joint venture, while Martin Sorrell hailed a "super strong" first half at his advertising firm S4 Capital.
AB Foods said fourth-quarter adjusting operating profit in its foods units and at Primark "is anticipated to exceed our expectations". Primark saw sales come in lower than expected, though margins improved, the company explained.
"For the full year, we now expect AB Sugar to deliver an even greater improvement in adjusted operating profit over last year than previously expected and Primark's adjusted operating profit, stated before repayment of job retention scheme monies, to be ahead of last year," the company said.
Group adjusted operating profit for the financial year ending September 18, also before furlough repayments, is expected to top last year's levels, benefiting from an extra trading week.
At AB Grocery, which includes the Twinings tea and Silver Spoon sugar and sweetener brands, annual revenue is expected to rise. AB Sugar will post a 7% annual revenue hike, the agriculture arm AB Agri has seen sales "well ahead of last year", and the Ingredients unit also will post a revenue improvement.
At fast-fashion retailer Primark, sales in the second half of the financial year are expected to come in at GBP3.4 billion.
"Primark's operating profit margin in the second half, stated before the charge for repayment of job retention scheme monies, benefited from a significant reduction in store labour costs and lower store operating costs and is expected to be over 10%," AB Foods explained.
Third quarter like-for-like sales were up 3% on pre-pandemic times but in the fourth quarter, sales have been hurt by lower footfall levels and the spread of the Delta variant.
"In the UK, our sales were affected by the rapid and significant increase in late June and early July in the number of people required to self-isolate following contact tracing alerts - the 'pingdemic'. Data shows that high street footfall was impacted by the caution displayed by many consumers at that time. The self-isolation rules were then eased in early August," AB Foods explained.
In addition, the company cautioned that virus restrictions have slowed its store rollouts and a stronger pound will result in a currency exchange hit of around GBP35 million for the full year.
Elsewhere in London, jet engine maker Rolls-Royce and aerospace and defence contractor Babcock International have sold their respective stakes in the AirTanker Holdings joint venture to Equitix Investment Management.
The duo will sell their stakes in AirTanker Holdings, which holds assets used by a joint venture that provides aviation services for the UK Royal Air Force's Voyager fleet. Rolls-Royce, which owns just over 23% of the JV, will net GBP189 million. Babcock, with just over a 15% holding, will receive GBP126 million. Rolls and Babcock each will retain their 23.5% stakes in AirTanker Services, the fleet operator.
"The sale is part of Babcock's ongoing targeted disposal programme, which aims to generate at least GBP400 million of proceeds. Proceeds from this transaction will be used to reduce net debt," Babcock added.
Rolls-Royce said the sale will go towards its aim of achieving GBP2 billion through disposals.
S4 Capital saw revenue almost double in the six months to June 30. Revenue jumped 98% to GBP279.3 million from GBP141.3 million.
The advertising firm's pretax loss widened, however, to GBP19.4 million from GBP1.0 million a year earlier. Adjusting items of GBP47.4 million, up from GBP14.9 million a year earlier, drove the widened loss. Adjusting items including acquisition payments, amortisation and share-based compensation.
"We have had a super strong first half start to 2021, in line with the fast-growing digital platforms. Even in comparison to 2019, we are up strongly, again more like the digital platforms. It is clear that the tragedy of Covid-19 has accelerated the speed of digital transformation and disruption at consumer, media and enterprise levels. Especially, in these difficult times, we continue to be committed to ensuring that our people are well and safe, with sustainability and responsibility being a priority," Executive Chair Sorrell said.
"After only three years, on our third birthday as a listed company and with a market capitalisation of around six and a half billion dollars, which is well in to the top 125 FTSE companies, we are now in a position to build even stronger value-adding relationships with tech, healthcare, financial and [fast-moving consumer goods] clients amongst others.
Brent oil was quoted at USD73.56 a barrel early Monday, up from USD72.67 late Friday. Gold fetched USD1,790.06 an ounce, down slightly from USD1,795.25.
Equity markets in Asia were on the back foot earlier Monday but have since managed to notch some gains. The Nikkei 225 in Tokyo closed up 0.2%. In China, the Shanghai Composite was 0.2% higher in late trade, though the Hang Seng Index in Hong Kong slumped 2.0% on technology sector declines. The S&P/ASX 200 in Sydney ended 0.3% higher.
The pound was quoted at USD1.3817 early Monday morning in London, down from USD1.3845 at the London equities close on Friday. The euro stood at USD1.1784, down from USD1.1828. Against the yen, the dollar was trading at JPY110.11, up from JPY109.85.
Inflation will be in focus this week, with a US consumer price index reading on Tuesday, before the UK's on Wednesday. France and Canada also report CPI data on Wednesday.
"We have an FOMC meeting next week. Despite the increasing noise from Fed officials, I expect no taper announcement, although they may signal its game-on for the November meeting," Oanda analyst Jeffrey Halley commented.
By Eric Cunha; ericcunha@alliancenews.com
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