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LONDON MARKET OPEN: Spirits lifted by report of slowing US inflation
Stock markets were in a positive mood early Thursday, after a cooler-than expected inflation reading in the US gave Wall Street a big boost, with the tech-heavy Nasdaq Composite closing up almost 3%.
In London, focus was back on earnings reports, with positive updates by Entain and Coca-Cola HBC keeping optimism intact.
The FTSE 100 was marginally lower, down 1.70 points at 7,505.41. However, the mid-cap FTSE 250 index was up 29.75 points, or 0.2%, at 20,327.48. The AIM All-Share index was up 3.91 points, or 0.4%, at 923.69.
The Cboe UK 100 index was down 0.2% at 749.77. The Cboe 250 was up 0.1% at 17,660.65. The Cboe Small Companies was up 0.1% at 14,342.20.
In Paris, the CAC 40 stock index was up 0.2%, while in Frankfurt, the DAX 40 was 0.4% higher.
In the FTSE 100, Coca-Cola HBC was the best performer, up 3.0%. The soft drinks bottler said it achieved strong interim results in the face of macroeconomic and geopolitical uncertainty and expects to generate positive organic revenue growth for 2022.
For the six months to June 30, net sales revenue was €4.21 billion, up 30% from €3.25 billion last year, but net profit was €152.9 million, down 34% from €233.1 million, hit by a charge from exiting Russia.
Looking ahead, it reinstated guidance for 2022 and expects to generate comparable earnings before interest and tax in the range of €740 million to €820 million. Jefferies highlighted this was higher than consensus of €727 million. Comparable Ebit was €462.5 million in the first half, up 32% from €350.3 million a year before.
Entain was up 2.0% after the gambling firm said it will pay an interim dividend alongside its half-year results, as it diversified into Europe.
For the six months to June 30, net gaming revenue was £2.12 billion, up 18% from £1.79 billion a year before, and revenue was £2.09 billion, up 19% from £1.77 billion.
Underlying Ebitda was £471 million, up 17% from £401.1 million. Pretax profit was £39.5 million, down 70% from £130.6 million last year.
Turning to returns, Entain said it was implementing a new dividend policy. It is proposing a progressive dividend, starting with a total dividend of £100 million for 2022, to be paid to shareholders in equal instalments in respect of the first half and annual results. Entain declared an interim dividend of 8.5 pence per share.
Separately, Entain said it has partnered with EMMA Capital, an investment firm based in the Czech Republic, to establish a new venture, Entain CEE, to drive expansion in Central and Eastern Europe.
Entain will own 75% of the economic rights in Entain CEE, with EMMA Capital owning the other 25%. Entain CEE will acquire the SuperSport Group, the gaming and sportsbook operator in Croatia from EMMA for €600 million in cash at completion.
Shore Capital said the Entain interim results were slightly ahead of expectations, while its forecast is in line. The broker said it expects to maintain its full-year estimates for Entain, suggesting a second half broadly similar to the first. It expects more progress for the company next year as headwinds dissipate.
Shore kept its 'buy' rating on the stock.
Conversely in the FTSE 100 early Thursday, Rio Tinto was down 3.5% after the stock went ex-dividend, meaning new buyers no longer qualify for the latest payout.
Antofagasta was down 0.6%. The Chilean copper miner slashed its interim dividend as lower copper prices dented interim results.
For the six months to June 30, revenue dropped 30% to $2.53 billion from $3.59 billion a year before, due to lower copper and by-product sales volumes and lower realised copper prices. Earnings before interest, tax, depreciation and amortisation fell 48% to $1.24 billion from $2.36 billion, and pretax profit was down 62% to $679.6 million from $1.79 billion.
Antofagasta declared an interim dividend of 9.2 US cents, down 61% from 23.6 cents paid out last year.
In the FTSE 250, Network International was the standout performer, up 17%, after the payment solutions provider reported strong interim results and launched a substantial share buyback programme.
For the six months to June 30, pretax profit more than doubled to $37.3 million from $17.0 million last year on revenue of $205.0 million, up 31% from $156.4 million.
Turning to returns, the Dubai, UAE-based firm said it intends to commence a share buyback programme of up to an aggregate purchase price of $100 million.
Looking ahead, Network International still expects annual revenue growth of 27% to 29%.
‘Our market entry into the Kingdom of Saudi Arabia is progressing well, having recently secured a second new customer this year. We also see an opportunity to return excess cash to shareholders through a share buyback programme, whilst retaining our existing flexibility to take advantage of additional growth opportunities which may arise,’ said Chief Executive Nandan Mer.
Harbour Energy was up 4.5% after Goldman Sachs started coverage on the North Sea-focused oil and gas firm with a 'buy' rating. Harbour Energy was formed from the merger of Premier Oil and Chrysaor Energy last year.
New York ended higher on Wednesday, with the Dow Jones Industrial Average up 1.6%, S&P 500 up 2.1% and Nasdaq Composite up 2.9%, as markets priced in less aggressive interest rate hikes by the US Federal Reserve in the months ahead.
US consumer prices rose by 8.5% in July from a year before, slowing from the 9.1% annual rise seen in June. Market consensus, according to FXStreet, had seen inflation easing only to 8.7% for July.
Versus the previous month, July's prices were entirely flat, slowing from the 1.3% rise in June and behind the market consensus of 0.2%.
Deutsche Bank urged caution: ‘Even as markets have been celebrating the prospect of a less aggressive Fed, it's worth remembering that we're still nowhere near out of the woods yet, and annual inflation of 8.5% is still way above what we've been used to experiencing over recent decades.’
In Asia on Thursday, financial markets in Tokyo were closed for the Mountain Day holiday. In China, the Shanghai Composite closed up 1.5%, while the Hang Seng index in Hong Kong was up 2.2%. The S&P/ASX 200 in Sydney ended up 1.1%.
The dollar was higher across the board. The pound was quoted at $1.2221 early Thursday, down from $1.2253 at the London equities close Wednesday.
The euro was priced at $1.0311, down from $1.0349. Against the Japanese yen, the dollar was trading at JP¥132.68, up from JP¥132.41.
Brent oil was quoted at $97.35 a barrel Thursday morning, up from $94.77 late Wednesday. Gold stood at $1,786.44 an ounce, lower against $1,799.85.
The economic events calendar Thursday has US producer prices and jobless claims numbers at 1330 BST.
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