City of London skyline
Stocks drift following weak Asian trading / Image source: Adobe

European equities started Tuesday in a muted fashion, following unconvincing trade from Asia.

The FTSE 100 index opened down 29.22 points, 0.4%, at 8,394.98. The FTSE 250 was down 86.45 points, 0.4%, at 20,786.88. The AIM All-Share fell 2.67 points, 0.3%, at 807.27.

The Cboe UK 100 was down 0.4% at 837.69, the Cboe UK 250 was down 0.3%, trading at 18,205.44, and the Cboe Small Companies was largely flat at 16,525.42.

In European equities on Tuesday, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt fell 0.2%.

In Asia, the Shanghai Composite ended down 0.4%, while the Hang Seng in Hong Kong was 2.1% lower. In Tokyo, the Nikkei 225 fell 0.3%, while Sydney’s S&P/ASX 200 ended 0.2% lower.

The pound was quoted at $1.2718 early Tuesday in London, up from $1.2702 at the time of the European equities close Monday. The euro stood at $1.0866, up slightly from $1.0862. Against the yen, the dollar was trading at JP¥156.12, largely unmoved from JP¥156.14.

Speaking at a conference in the US state of Florida on Monday, Fed vice chair for supervision Michael Barr said the bank had made ‘tremendous progress’ in bringing inflation down from its 2022 peak, while unemployment – the other leg of its dual mandate – had remained low.

‘We are not yet all the way to our target of 2%,’ he said in prepared remarks, noting the ‘disappointing’ recent inflation data.

‘These results did not provide me with the increased confidence that I was hoping to find to support easing monetary policy by reducing the federal funds rate,’ he said.

‘This means that we will need to allow our restrictive policy some further time to continue to do its work,’ added Barr, a permanent voting member of the Fed’s rate-setting committee.

Also speaking Monday, Fed Vice Chair Philip Jefferson – another permanent voting member of the Fed’s rate-setting committee – said inflation was still coming down, ‘although nowhere near as quickly as I would have liked.’

‘In making judgments about the appropriate stance of policy rate over time, I will be carefully assessing the incoming data, the evolving outlook, and the balance of risks,’ he said in prepared remarks for a conference in New York.

Gold was quoted at $2,414.12 an ounce early Tuesday, down from $2,423.50 late Monday afternoon. Brent oil was quoted at $83.13 a barrel, falling from $83.65.

Swissquote analyst Ipek Ozkardeskaya said ‘record US production and comfortable spare capacity from Opec’ are keeping a lid on oil prices, despite ‘Middle East tensions, rebound in Chinese industrial production [and] the reflation trade that’s supported by the prospects of central bank rate cuts’.

In London, AstraZeneca shares rose 0.6% after it set out its ambition to achieve $80 billion in annual revenue by the end of the decade, as it signalled a new ‘era of growth’.

The target, which the Cambridge pharmaceuticals manufacturer firm described as ‘bold,’ would represent a 75% jump from the $45.81 billion it achieved in 2023.

AstraZeneca said it would meet its aim by bolstering its oncology offering and rare disease portfolio, and launching 20 new treatments before the end of the decade.

Speaking ahead of an investor day, Chief Executive Officer Pascal Soriot said: ‘Today AstraZeneca announces a new era of growth. In 2023 we delivered the ambitious $45 billion revenue goal set a decade ago. With the exciting growth of our innovative pipeline, which has the potential to transform millions of lives, we are now aiming for $80 billion by 2030. We are planning to launch 20 new medicines by 2030, many with the potential to generate more than $5 billion in peak year revenues. The breadth of our portfolio together with continued investment in innovation supports sustained growth well past the end of the decade.’

AstraZeneca said as it continues to grow across all therapy areas, and will continue to decouple its carbon emissions from its increase in revenue.

Entain fell 1.1%. It backed its ‘portfolio of diversified’ assets, as it reported the conclusion of a strategic review on Tuesday, opting to hold on to its brands, save for a non-core offering in Georgia.

The Ladbrokes owner had kicked off the strategic probe in January ‘with the objective of maximising shareholder value’.

The firm said on Tuesday: ‘Entain has the appropriate portfolio of diversified strategic assets, brands, capabilities and geographic footprint to ensure it is well positioned to deliver high quality long term growth. There remains significant upside by focusing on delivery of the group’s strategy of returning to organic revenue growth, expanding margins and winning in the US.’

Aside from Ladbrokes, Entain also owns the Coral, bwin and PartyPoker brands, all units it will hang on to. It is open to a sale of Crystalbet, however, a ‘non-core’ gaming brand in Georgia.

‘Strategic alternatives for this business will be considered, including interest already received from potential acquirers,’ Entain said.

Entain noted the strategic review considered recent developments in key markets. This included Brazil returning to growth and a ‘levelling of the regulatory playing field in the UK’, where it also expects to resume growth later this year.

‘Delivery of the product roadmap for BetMGM is progressing well, including recently launched MLB and NBA sports betting markets supported by Angstrom’s unique capabilities, particularly in parlay products,’ Entain said on the joint-venture co-owned by one-time suitor MGM Resorts International.

The firm also celebrated the Nevada Gaming Commission last week Thursday approving a licence application ‘without limitation’.

SSP declined 8.3%. It reported a rise in half-year, though a decline in profit. Its net debt also grew. SSP outlined a positive outlook, however, expecting a boost from a summer of sport.

The operator of food and beverage outlets in travel locations said revenue in the half-year to March 31 rose 15% to £1.52 billion from £1.32 billion a year prior. Pretax profit, however, fell 19% to £12.8 million from £15.8 million. Hurting its bottom line, finance income declined 21% to £8.9 million, while finance expenses rose 17% to £54.4 million.

SSP declared an interim dividend of 1.2 pence per share. It did not pay a first-half dividend a year prior. It had returned to the dividend list with a final dividend for the previous financial year. That was its first dividend since the onset of the pandemic.

CEO Patrick Coveney said: ‘Trading momentum has continued into the second half, and we are confident in delivering on our expectations for the full year. In particular, we are well set to capitalise on what we anticipate will be a Summer of strong demand in all our markets - including Continental Europe, where the Olympics and the European Championships will help boost footfall in airports and stations. We will also start to realise the benefit of our latest value-creating acquisition in Australia and new market entries in New Zealand and Indonesia.’

The firm’s net debt increased to £619 million from £297 million a year prior, it said.

Also on the decline, Shoe Zone slumped 10%. The retailer now expects annual pretax profit of £13.8 million, lower than its original outlook of £15.2 million.

‘At the point at which the original forecast was prepared the consensus was that the national living wage would increase to £11.08, but when announced, the increase was to £11.44 which adds £400,000 of cost in our second half. The continuing disruption in the Middle East has increased shipping times and container prices which adds a minimum of £500,000 of cost and due to the large number of stores we have closed, particularly in Scotland, we have provided for an additional £500,000 of dilapidations,’ it explained.

Revenue in the half year to March 30 rose 1.5% to £76.5 million from £75.4 million 12 months earlier. Pretax profit rose 71% to £2.6 million from £1.5 million.

It maintained its interim dividend at 2.5 pence per share.

XP Power shares jumped 46% to 1,702.00p after it received takeover interest from Nasdaq-listed Advanced Energy Industries.

Advanced Energy Industries is a maker of precision power conversion, measurement, and control solutions. AEI said it has made three all-cash takeover approaches, each slightly higher than the last. The first offer in October valued XP Power’s equity at £339 million, a second roughly two weeks later in November value it at £369 million and the most recent, earlier this month, valued it at £468 million. Including debt, the latest proposal has a total value of £571 million.

At £19.50 per share, the latest proposal is a 68% premium to power control systems maker XP Power’s closing price of £11.64 on Monday.

Advanced Energy Industries hit out at the ‘lack of engagement’ from XP Power.

AEI said: ‘Each of these proposals has been at a significant premium to the share price at the time of each respective proposal, but the board of XP Power unanimously rejected each of these proposals. Given the lack of engagement from the board of XP Power, Advanced Energy believes that XP Power’s shareholders should be made aware of the latest proposal, which represents a compelling and highly attractive opportunity.’

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Issue Date: 21 May 2024