LONDON MARKET PRE-OPEN: Barclays record profit; Unilever backs outlook

(Alliance News) - Stock prices in London are seen starting Thursday's session on the back foot, with sentiment in the UK weighed down by rising Covid cases and global investors nervously watching Evergrande shares plunge.

In early UK company news, lender Barclays posted a record profit for the first nine months of 2021. Consumer good firm Unilever retained margin guidance despite warning on cost inflation. Retail investment platform AJ Bell reported a strong fourth quarter even as trends started to normalise following the lifting of Covid restrictions.

IG says futures indicate the FTSE 100 index of large-caps to open 31.90 points, or 0.4%, lower at 7,191.20 on Thursday. The FTSE 100 closed up 5.57 points, or 0.1%, at 7,223.10 on Wednesday.

"US exuberance isn't translating into today's European open which looks set to be weaker one, after markets in Asia came under pressure, with Evergrande shares once again getting clobbered as trading restarts there, while concerns about rising Covid cases as winter approaches is again taking its toll," said Michael Hewson, chief market analyst at CMC Markets.

Wall Street ended mostly higher on Wednesday, with the Dow Jones Industrial Average ending up 0.4% and the S&P 500 up 0.4% but the Nasdaq Composite down 0.1%.

However, the mood soured in Asia on Thursday. The Nikkei 225 index in Tokyo closed down 1.9%. The Shanghai Composite was down 0.1%, while the Hang Seng index in Hong Kong was down 0.9%. The S&P/ASX 200 in Sydney ended flat.

Chinese property giant Evergrande's shares plunged after resuming trading in Hong Kong on Thursday, with the failure of a unit sale deal deepening fears the indebted firm will collapse and send shockwaves through the world's second-largest economy.

Evergrande had suspended trading on October 4 pending an announcement on a "major transaction" as it struggled with some USD300 billion of debt – with investors worried about the potential fallout from its predicament.

The stock was trading 11% lower in late afternoon trading in Hong Kong.

A deal worth HKD20.04 billion, or USD2.58 billion, to sell a 50.1% stake in its property services arm had fallen through, it said in a statement Wednesday, when it announced it would resume trading.

In the UK, worries are centred on rising coronavirus cases heading into winter. Health Secretary Sajid Javid said the government has no current plans to implement its Plan B for tackling coronavirus but warned that Covid-19 cases could reach 100,000 a day as the country enters a challenging winter period.

Javid told the Downing Street press conference the government was concerned about the number of cases, but that vaccines were "clearly working" when it came to hospital admissions and deaths.

Sterling was quoted at USD1.3804 early Thursday, easing from USD1.3820 at the London equities close on Wednesday.

The euro traded at USD1.1653 early Thursday, firming on USD1.1647 late Wednesday. Against the yen, the dollar fell to JPY114.01 versus JPY114.24.

Gold was quoted at USD1,785.01 an ounce early Thursday, largely unchanged from USD1,783.82 on Wednesday. Brent oil was trading at USD85.45 a barrel, higher than USD85.02 late Wednesday.

In early UK company news, Barclays posted a record profit figure, hailing its Corporate & Investment Bank and an improving consumer backdrop.

Barclays reported pretax profit of GBP6.94 billion for the nine months to the end of September, a record figure and multiplied from just GBP2.42 billion a year ago.

"On top of a good first half, a strong third quarter performance means Barclays has delivered its highest [third quarter year-to-date] pretax profit on record in 2021, demonstrating the benefits of our diversified business model," said Chief Executive Jes Staley.

Total income dipped slightly, to GBP16.78 billion from GBP16.83 billion, but the bank's results were boosted by a GBP622 million credit impairment release, as opposed to being hit by a charge of GBP4.35 billion a year ago.

"The net release included a reversal of GBP1.1 billion in non-default charges, primarily reflecting the improved macroeconomic outlook," the bank explained.

Barclays reported a "strong" Corporate & Investment Bank performance, with Investment Banking fees and Equities income having their best third quarter year-to-date performance on a comparable basis. It also saw a recovery on the consumer side, with strong volumes in the UK for mortgage and deposit volumes.

"Against that backdrop, we are focused on balancing cost efficiencies with further investment into high-returning growth opportunities. Our CET1 ratio of 15.4% means we are also in a strong position to balance this growth with a key priority of returning excess capital to shareholders," said Staley.

Consumer goods maker Unilever reported a slowdown in underlying sales growth but retained its full-year guidance.

Third quarter underlying sales growth was 2.5% on a year ago, slowing from the 5.0% achieved in the second quarter. The year-to-date figure was 4.4%, moderating after first-half growth of 5.4%.

Nonetheless, Unilever backed its full-year underlying growth guidance range of 3% to 5%. It also held margin guidance despite warning that cost inflation remains "at strongly elevated levels", and this is expected to continue into next year.

"We have and will continue to respond across our categories and markets, taking appropriate pricing action and implementing a range of productivity measures to offset increased costs," said Chief Executive Alan Jope.

AJ Bell reported good growth in customers, net inflows and assets under administration over its recently ended financial year, even as it saw trends start to normalise following the lifting of lockdown restrictions.

Total customer numbers for the financial year ended September 30 rose 30% to 382,754, with total net inflows up 52% to GBP6.4 million. Total assets under administration rose 29% to close at GBP72.8 billion.

"Following the gradual easing of Covid restrictions over the course of the summer, we have seen retail trading activity return to more normal levels compared to the peaks seen earlier in the year. However, we are pleased that our key drivers of long-term growth, namely customer numbers and net inflows, have continued strongly," said Chief Executive Andy Bell.

"In the final quarter of our financial year, net new platform customers increased by 16% and platform net inflows increased by 78% compared to the equivalent quarter in 2020."

Just Eat Takeaway.com set out some long-term targets ahead of a Capital Markets Day on Thursday.

The food delivery firm reiterated guidance for 2021 - for gross transaction value to be in a range of EUR28 billion to EUR30 billion - and said it expects GTV to grow by "mid-teens percentage points" in 2022. In excess of EUR30 billion of GTV will be added over the next 5 years, it said.

This year will be the peak for losses before the 2022 adjusted earnings before interest, tax, depreciation and amortisation margin improves to a range of minus 0.6% to minus 0.8% of GTV. Just Eat Takeaway said Thursday it is targeting a long-term margin in excess of 5% of GTV.

On the corporate side in the US, IBM shares will be in focus after they tumbled 4.3% after-hours following its third quarter results. For the three months ended September 30, net income declined 33% to USD1.13 billion from USD1.70 billion the same period a year before. Diluted earnings per share also dropped 34% to USD1.25 from USD1.89.

Shares in electric car maker Tesla also slipped post-market, down 1.6%, despite it posting a sharp rise in third-quarter earnings mainly due to vehicle volume growth and cost reductions. Third-quarter net income surged to USD1.62 billion from USD331 million the year before, with diluted earnings per share of USD1.44, up sharply from USD0.27.

The economic events calendar on Thursday has the latest US jobless claims numbers at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

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