- The FTSE 100 fell after weak Chinese figures
- Keller soared after raising the guide
- L&G weakened despite a confident outlook
08.47: FTSE 100 falls, L&G weakens despite upbeat outlook
The FTSE 100 remains in the red, down 29 points, after weak data out of China.
Victoria Scholar at Investor Interactive said: “European markets have opened lower with just a handful of stocks in the FTSE 100 green as risk-off sentiment gripped global markets after disappointing data out of China.”
Legal & General Group PLC (LSE:LGEN) fell 2.0% although it said the “belief” in achieving its five-year ambition had not changed.
The FTSE 100 listed company said the transition to a new accounting method would not hurt its “strategy, solvency or dividends.” IFRS 17 accounting standards for insurance companies are due in early 2023.
“This only impacts our annuity reporting and protection business, changing the timing of revenue recognition from these products but not the quantum,” L&G said in a statement.
The insurer said it was on track to raise £8 billion to £9 billion in capital between 2020 and 2024.
L&G said it had conducted pension risk transfer transactions worth GBP6.8 billion this year.
“There has been an increasing number of pension schemes approaching the insurance market, along with an increase in GBP1 billion+ transactions, with several other pension schemes intending to complete transactions this year,” L&G said.
“The pathway for 2023 is the largest we have ever seen and we are on track for one of our busiest years yet.”
08.28: SIG falls after forecasting marginal gains
SIG PLC (LSE:SHI) tumbled 10% after predicting its full-year operating profit would be “towards the lower end” of market expectations.
Suppliers of insulation and specialist building products across Europe said market conditions remained challenging and varied, with weaker demand in May and June, especially in Germany and France.
Underlying operating profit is expected to be around £33 million in the year to 30 June, with the early impact of productivity initiatives partly offsetting weak demand and the impact of inflation on operating costs.
“While the timing of demand recovery remains uncertain, H2 earnings are expected to further benefit from ongoing productivity initiatives,” said SIG.
The company said revenue of £1.424 million would be flat year-on-year, reflecting reduced volumes offset by inflation in input prices.
8:15 a.m.: Footsie slips as a feeble Chinese weighs in
The FTSE 100 fell on early exchanges as figures from China suggest the economic recovery may be running out of steam.
Susannah Streeter at Hargreaves Lansdown: “‘There are renewed concerns about a weakening global economy as data from China’s services sector underscores just how tepid the post-pandemic recovery is, just as trade tensions between Beijing and Washington escalate.”
At 8:15 a.m., the London blue-chip was down 18.96 points, 0.3%, at 7,500.76 while the FTSE 250 was down 75.91 points, 0.4%, to 18,457.88.
In China, the Caixin China General Services PMI, which assesses a range of business conditions including output and orders, fell to 53.9 in June from 57.1 in May.
Asian-focused stocks fell. Prudential fell 1.7%, Standard Chartered fell 0.8% and HSBC fell 0.9%.
China’s more uncertain outlook put pressure on oil prices with Brent crude down 0.5% to US$75.89/barrel.
Law & General fell 2.0% although it said the “belief” in achieving its five-year ambition remained unchanged.
The insurer said the transition to the new accounting method would not hurt its “strategy, solvency or dividends.”
It is said to be on track to generate GBP8 billion to GBP9 billion in capital for the period between 2020 to 2024.
AO World rose 3.8% after reporting a return on profit in the 12 months to March 31.
The online power retailer said it is confident of achieving its ambitious 5% EBITDA in the short term and returning to top growth in the medium term.
Peel Hunt said the numbers were in line with expectations and were not expected to change significantly.
“We anticipate limited changes to the consensus, which is likely to remain around £60 million of EBITDA and £30 million of pre-tax profit, although this implies some improvement from the lower end estimates.”
Keller Group was another gainer, soaring 6.2%, after saying it expects full-year base operating profit to “materially ahead” market expectations, although the increase in earnings will be moderated by the latest interest rate hike.
“Trade in the first half remained strong and we anticipate a record performance in the period,” said the geotechnical engineering firm.
7.53am: BoE considers forcing foreign banks to change branches with subsidiaries
The Bank of England is considering plans to force more international banks to set up subsidiaries in the UK, according to a report in the Financial Times.
The move could reduce the threshold that requires foreign banks with corporate businesses in the country to set up subsidiaries, with their own capital and liquidity.
The BoE is considering it as part of its review of Silicon Valley Bank’s dramatic collapse this year, according to the FT.
Subsidiaries, like the one SVB has in London, allow local regulators to take control of failing banks rather than leave their fate to the discretion of their parental supervisors.
But forcing more banks to set up such units is likely to be unpopular in the industry, as a large subsidiary is more expensive than simply maintaining a UK branch, the report added.
07.41: Topps Tiles supports guidance as sales growth remains strong
Topps Tiles PLC (LSE:TPT) backed full-year guidance after reporting steady strong sales growth.
“We remain confident that pre-tax adjusted earnings in the second half will be materially higher than in the first half, and that we will perform in line with market expectations2 for the year as a whole,” the company said in a statement.
In a trade update for the 39 weeks to July 1, the retailer said sales remained strong in the third financial quarter, up 4.4% year-over-year.
Sales at Topps Tiles remained strong, growing 2.5% on a like-for-like basis as gross margins improved as inflationary pressures eased and shipping costs fell.
Sales performance within the Online Pure Play brand remained “excellent”, with sales growth of over 60% in the third quarter, led by Pro Tiler Tools.
Topps Tiles is taking action to improve performance in its commercial business, Parkside, and has taken on a restructuring fee of £0.4 million.
However, it is believed that the unit is well positioned for future growth.
07.28: AO World returns to profit, confident of hitting target
AO World PLC (LSE:AO.) made profits for the full year, despite a decline in revenue, and forecasts a return to top growth in the coming financial year.
The strong performance throughout the year illustrates remarkable progress towards the group’s plans to pivot the business to focus on profits and making money, it said in a statement.
The online electric retailer reported a pre-tax profit of £7.6 million for the year ended March 31 compared with a loss of £10.5 million the previous year.
Revenue fell 17% to £1.14bn from £1.37bn while EPS increased to 1.13p from LPS 0.75p.
Adjusted EBITDA doubled to £45 million from £23 million.
The company said it is confident of achieving its ambitious 5% EBITDA in the short term and returning to top growth in the medium term.
Chief Executive John Roberts, said: “The significant improvement in our profit performance speaks for itself and has been achieved by focusing on our core strengths and streamlining our operations.”
AO said earnings were in line with the plan, “driven by actions taken to remove non-core channels and loss-making sales, also reflecting weak consumer sentiment attributed to cost-of-living pressures.”
07.03: FTSE looks lower ahead of PMI results
The FTSE 100 is expected to begin the process quietly ahead of a number of service sector PMI readings.
Spread betting firms said the London blue-chip index was down about 11 points. London’s large cap index had closed down 7.54 points, or 0.1%, at 7,519.72 on Tuesday.
US markets were closed for Independence Day while Asian markets plunged following a slowdown in China’s Caixin purchasing services purchasing managers’ index which fell to 53.9 points in June from 57.1 in May.
In China, the Shanghai Composite fell 0.5%, while the Hang Seng index in Hong Kong fell 1.3%. The Nikkei fell 0.5% in Tokyo.
After the London close there will be minutes from the most recent Federal Open Market Committee meeting.
“Tonight’s minutes may offer further clues as to the Fed’s thinking as to why they think that at least two more rate hikes will be needed by the end of this year,” said Michael Hewson of CMC.
Back in London, and aside from the service sector PMI print, updates from AO World and Topps Tiles will provide initial focus.
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