(Alliance News) - Stocks in London are seen falling on Wednesday following a lower close in the US and weakness in Asia amid fears of aggressive tightening from the US Federal Reserve, ahead of the bank's meeting minutes.
In early company news, tobacco firm Imperial Brands said first-half net revenue is expected to be flat. Food packing business and processor Hilton Food Group raised its annual dividend. Redrow became the latest housebuilder to sign the UK government's fire safety pledge.
IG futures indicate the FTSE 100 index is to open 20.32 points lower at 7,593.40. The index closed up 54.80 points, or 0.7%, at 7,613.72 on Tuesday.
Imperial Brands said it continues to perform in line with its five-year strategy launched in 2021.
The cigarette maker said investment in its top-five combustible markets - which account for around 70% of adjusted operating profit - has driven an increase in aggregate market share for those markets.
Gains in the US, UK and Australia more than offset declines in Germany and Spain. These share gains were achieved while maintaining strong pricing discipline, and overall tobacco volumes are in line with expectations, it said.
In addition, Imperial Brands said consumers have responded positively to the pilot launches of its Pulze heated tobacco system in Greece and the Czech Republic and improved consumer marketing for its 'blu' vapour product in the US.
"We are making good progress against our strategic objective of building a sustainable, consumer-centric Next Generation Product (NGP) business and we will provide an update on our next steps at the interim results. First-half NGP revenues are expected to be slightly ahead of the prior period, driven by growth in Europe," the company said.
Imperial said it was on track to deliver full-year results in line with revised guidance issued in March, with expected full-year net revenue growth of around 0% to 1% on a constant currency basis and adjusted operating profit growth of around 1%.
Further, Imperial said first-half net revenue is expected to be broadly flat on last year on a constant currency basis, in line with expectations. This reflects a weaker tobacco performance in Europe, which offsets growth in other regions, it explained.
Interim adjusted operating profit is expected to grow by around 2% on a constant currency basis, benefiting primarily from reduced losses in NGP, it said, while tobacco performance will be weighted to the second half.
First-half tobacco operating profit will be broadly flat on last year on a constant currency basis, with increased investment behind its strategy offsetting the benefit of reduced US litigation costs compared to last year, Imperial added.
Hilton Food Group said it delivered a strong annual financial performance with volumes and revenue both growing.
Separately, Hilton Food said Nigel Majewski is to stand down from the chief financial officer post and promoted Matt Osborne to the position.
For the year ended January 2, the company generated revenue of GBP3.3 billion, up 22% from GBP2.8 billion the year before, driven by growth across proteins and geographies.
However, annual pretax profit was GBP47.4 million, down 12% from GBP54.0 million a year ago after exceptional items of GBP8.2 million. Adjusted pretax profit rose 13.0% to GBP67.2 million from GBP61.1 million.
Hilton Food declared a total dividend of 29.7 pence, up from 26.0p paid out a year ago.
The food company has been transforming the business to expand into new protein products and categories, to enter new international markets, to deepen its technology and engineering capabilities, and to expand sustainability across all protein categories.
"Following the completion of the purchase of Foppen, we are well set to grow further and enter the high growth smoked salmon market. We already now generate more than two-thirds of our revenue, and three-quarters of our volume, outside the UK, and are therefore well placed to create long-term sustainable value, in spite of short-term challenges or market headwinds. While those headwinds persist, our model positions us well to provide nutritious, affordable, and increasingly sustainable protein at scale, fulfilling changing consumer demands," said Chief Executive Officer Philip Heffer.
Redrow said it would sign the UK government's pledge to for housebuilders fund the remediation of life critical fire safety issues on high-rise buildings.
The housebuilder said that in signing the pledge it will be remediating all the buildings in which it was involved, going back 30 years.
Redrow said this was a "highly complex matter" and the exact remediation work required and for the exact number of buildings would take time to determine. Its existing provision for fire safety in high rise buildings is GBP36 million.
However, it believes an additional provision of GBP164 million would be required as a result of the pledge. This will be treated as an exceptional item in the results for the 2022 financial year, it explained.
"We will work with leaseholders to remediate their buildings and, where possible, pursue recoveries from main contractors, warranty providers and other third parties. As these recoveries are not certain, they have not been recognised in estimating the provision. These remediation works are expected to take a number of years to complete," the company said.
Wall Street stocks finished lower Tuesday following hawkish comments from a top Federal Reserve official that boosted expectations for more interest rate hikes.
Saying inflation must be reined in, Fed Governor Lael Brainard warned the US central bank was "prepared to take stronger action" if warranted and could move to reduce the Fed's massive bond holdings as soon as its May meeting.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.8%, S&P 500 down 1.3% and Nasdaq Composite down 2.3%.
"Yesterday's comments put into sharp relief the concerns investors have, that in looking to rein back inflation, the Fed might overplay its hand and tighten too aggressively and tip the economy into recession. This concern looks set to manifest itself into a sharply lower open for markets in Europe this morning," said CMC Markets analyst Michael Hewson.
Wednesday's Fed minutes should offer some additional insight into the thinking of policymakers into this part of the central bank's normalisation process.
In Asia on Wednesday, the Japanese Nikkei 225 index ended down 1.6%. In China, the Shanghai Composite was down 0.4%, while the Hang Seng index in Hong Kong was down 1.4%. The S&P/ASX 200 in Sydney ended down 0.5%.
China's services sector contracted in March, as rising Covid-19 cases took their toll, survey data revealed on Wednesday.
The Caixin services purchasing managers' index fell to 42.0 points in March from 50.2 in February. March's figure moved below the 50.0 no-change mark, and it also suggested the sharpest activity decline since the virus first emerged back in February 2020.
China reported over 20,000 Covid-19 cases on Wednesday, the highest daily tally given since the start of the pandemic, with Shanghai the heart of the virus surge despite being in lockdown. The country's "zero-Covid" strategy has come under immense strain as cases spike.
Until March, China had kept daily cases low with snap localised lockdowns, mass testing, and strict restrictions on international travel. But the caseload has hit thousands per day in recent weeks, with officials saying they have detected a mutation of the highly transmissible Omicron variant near Shanghai.
The pound was quoted at USD1.3060 early Wednesday, down from USD1.3115 at the London equities close Tuesday.
The euro was priced at USD1.0885, down from USD1.0927. Against the yen, the dollar was trading at JPY123.91 in London, up from JPY123.38.
Brent was quoted at USD106.70 a barrel Wednesday morning, down from USD107.07 late Tuesday. Gold stood at USD1,920.65 an ounce, soft from USD1,926.80.
In the international economics events calendar on Wednesday, there are eurozone producer prices, a UK construction PMI and Fed meeting minutes.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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