European stocks rose while Asian counterparts were largely higher Wednesday, as cooler US job openings data reported on Tuesday gave equities a boost ahead of the afternoon’s ADP jobs report and Friday’s key nonfarms.
While not the official nonfarm payrolls, Wednesday’s ADP number provides insight into the health of the US jobs market. According to FXStreet cited consensus, there are expected to be 130,000 job additions, picking up from 113,000 in October.
Shares in New York underwhelmed on Tuesday, however.
‘From our seat, the current US macroeconomic data indicates a scenario where, against expectations, inflation might return to the target without necessitating a deep recession and possibly without a recession at all. However, this week’s labour market data balance could present a different narrative. Despite the favourable results for the soft landing camp via the job openings and labour turnover survey report, markets still lack high conviction,’ SPI Asset Management analyst Stephen Innes.
The FTSE 100 index opened 26.66 points higher, 0.3%, at 7,516.50. The FTSE 250 rose 107.99 points, 0.6%, at 18,595.52, and the AIM All-Share added 0.65 points, or 0.1%, at 717.33.
The Cboe UK 100 was up 0.4% at 750.60, the Cboe UK 250 traded 0.7% higher at 16,124.99, and the Cboe Small Companies shot up 1.9% at 13,693.73.
Stocks in Asia were higher. The Nikkei 225 climbed 2.0% in Tokyo, China’s Shanghai Composite ended down 0.1%, while the Hang Seng in Hong Kong shot up 0.8%. The S&P/ASX 200 surged 1.7% in Sydney.
In the US on Tuesday, Wall Street ended lower, with the Dow Jones Industrial Average down 0.2%, the S&P 500 down 0.1% and the Nasdaq Composite down 0.3%.
Sterling was quoted at $1.2600 early Wednesday, lower than $1.2613 at the London equities close on Tuesday. The euro traded at $1.0779 early Wednesday, lower than $1.0809 late Tuesday. Against the yen, the dollar was quoted at JP¥147.06 down slightly from JP¥147.10.
‘The larger-than-expected drop in October’s JOLTS job openings has offered new reasons to speculate on more rate cuts from the Federal Reserve next year, but the stronger ISM services figures in November have worked as an offsetting factor in terms of FX impact,’ ING analysts commented.
‘Shorting the euro appears to be one of the most popular bets in FX at the moment. Comments by hawkish hardliners like Isabel Schnabel yesterday – who suggested that another hike is now off the table and essentially moved the discussion to rate cuts – have added further pressure on the euro.’
Schnabel, once one of the ECB’s more hawkish voices, told Reuters that the central bank can take further hikes off the table. Roughly a month ago, she said another hike may have been an option.
‘When the facts change, I change my mind. What do you do, sir,’ Schanbel told Reuters, referencing a line from economist John Maynard Keynes.
In London, British American Tobacco was the worst FTSE 100 performer, down 7.6%.
Imperial Brands fell 1.6% in a negative read-across.
BAT warned of headwinds in the US amid the proliferation of illicit products, but the Kent maker expects earnings to come in line with its 2023 guidance.
The London-based maker of tobacco and other nicotine products expects to achieve a mid-single rise in constant currency adjusted diluted earnings per share for 2023.
However, organic revenue is now expected at the low end of its 3% and 5% guidance range at constant rates.
Looking further afield, it set out a commitment to ‘building a smokeless world’. It eyes 50% of its revenue to stem from non-combustibles by 2035.
BAT added: ‘Looking forward, we expect accretive New Category growth and stable combustible revenue to continue to drive total nicotine industry revenue growth. This underpins our medium-term guidance where we expect a progressive improvement to a 3-5% revenue and mid-single digit adjusted profit from operations growth, on an organic basis at constant rates by 2026.’
Investment bank Jefferies said the update was ‘not good’.
Jefferies said: ‘On 2023, combustible volume share worsening since 1H23, US commentary that premium pressures are picking up again, vape share globally now seeing material pressure, and no improvement in heated share since half-year. Then into 2024, lower sale guide raises questions around any possible vape acceleration in the US, while the increased investment suggests [reduced-risk products] not where it needs to be. It also now looks like any buyback won’t be until 2025 at the earliest. We would expect the stock to be down at least around 4% or more today. That said, we still think the stock is materially undervalued.’
Share price falls for Diageo, Shell and BP, three index heavyweights, also kept a lid on the FTSE 100’s progress early Wednesday.
Guinness maker Diageo fell 0.5% after UBS cut the stock to ’sell’. BP and Shell lost 0.2% and 0.3%, as Crude prices slipped. Brent oil was trading at $77.30 a barrel early Wednesday, lower than $78.49 late Tuesday.
On the up, Ocado climbed 5.0% after JPMorgan lifted it to ’neutral’.
Paragon Banking surged 11%. The lender announced a new share buyback and reported healthy annual earnings.
It reported total operating income of £466.0 million for the year ended September 30, up 19% from £393.0 million. Pretax profit declined by 52% to £199.9 million from £417.9 million. Its bottom line was hurt by £77.7 million worth of fair value losses, compared to £191.9 million worth of gains a year prior. On an underlying basis, profit surged 25% to £277.6 million.
‘We have today announced a further £50.0 million share buy-back for the 2024 financial year. Reflecting the sustained performance of the group, strength of our capital ratios and liquidity level, since 2015, the group has returned over £948.5 million to shareholders via share buybacks and dividends,’ Chief Executive Nigel Terrington said.
Paragon lifted its total dividend by 31% to 37.4 pence from 28.6p.
Tour operator Tui added 8.4%. It hailed ‘positive booking momentum’ and it announced it is mulling delisting from the London Stock Exchange.
Tui said there has been a ‘notable liquidity migration from UK to Germany’.
‘In light of the views expressed by shareholders and any further feedback from shareholders, the executive board is currently considering, if an upgrade to a Prime Standard listing in Frankfurt with MDAX inclusion and a delisting from the London Stock Exchange would be in the best interest of shareholders,’ Tui added.
For the financial year ended September 30, revenue improved by a quarter to €20.67 billion from €16.55 billion. It swung to a pretax profit of €551 million from a loss of €146 million.
Underlying earnings before interest and tax totalled €977 million, more than doubling from €409 million.
For the fourth-quarter alone, revenue surged 11% on-year to €8.48 billion and pretax profit jumped 30% to €1.15 billion.
Looking to financial 2024, Tui expects revenue to rise 10% year-on-year and its underlying Ebit to improve 25%.
‘Our guidance for FY24 is provided within the framework of the current macroeconomic as well as geopolitical uncertainties especially in the Middle East. It is based on the current positive booking momentum across both seasons, albeit with summer at an early stage, as well as a return to a normal hedging policy,’ it added.
Looking further afield, it set out a medium-term target of achieving compound annual underlying Ebit growth of 7% to 10%.
Ten Entertainment shot up 31%. The ten pin bowling operator agreed to a £287 million takeover from a vehicle indirectly owned by investment funds advised by Trive Capital Partners.
Neon Buyer will pay 412.5 pence per Ten Entertainment share, a 33% premium to its 310p closing price on Tuesday.
Ten Entertainment said: ‘Notwithstanding the opportunities to accelerate this growth, the TEG directors are conscious of the need to be balanced against the uncertainties and risks that exist in the short and medium term. TEG is not immune to the highly unstable national and international political outlook together with a volatile economic backdrop, all of which have impacted UK economic conditions and UK consumer confidence as well as having led to significant inflation in certain input costs.’
Gold was quoted at $2,030.67 an ounce early Wednesday, higher than $2,018.22 on Tuesday.
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