he steady week for the London market has continued as stronger mining and oil stocks keep the FTSE 100 index in positive territory.
September’s US inflation figures and Federal Reserve minutes showing that policymakers are ready to taper vast economic support before the end of the year failed to unsettle Wall Street overnight. There’s no let up in the current inflation pressures, however, with Brent crude oil and natural gas prices both creeping up.
In corporate news, Dunelm said recent sales growth had been encouraging as it stuck by the City’s recent increase to profit forecasts, but shares in defence firm Qinetiq slumped 9% after US sales were hit by the transition to the Biden presidency and the end of counter-insurgency missions in Afghanistan.
Former MoD research arm Qinetiq sent its shares 9% lower today as it revealed that it is experiencing technical and supply chain issues on a large complex programme.
The defence and security specialist, which generates a third of its revenues outside the UK, is now working with the unnamed customer and supply chain partners in an effort to mitigate the risk to less than £15 million.
It has also been hit in the US by the transition to the Biden presidency and end of the country’s counter-insurgency missions in Afghanistan, plus Covid-related delivery and supply chain challenges.
Hampshire-based Qinetiq, which was formed in 2001, now expects an underlying operating profit margin at the lower end of its 11-12% expected range. It is also braced for a potential write-down to guidance on the large complex programme.
Chief executive Steve Wadey remains confident in medium term prospects, however, after generating “excellent” order intake and a range of significant contract wins.
Recruitment group Hays cheers hot jobs market
The permanent recruitment market is the “hottest” it has been in the UK since 2007, with salary rises of up to 20% in some in-demand sectors, the finance chief of headhunters giant Hays has said.
Paul Venables told the Evening Standard: “For most companies the sheer scale and speed of recovery post-pandemic has been much better than they could have expected.”
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FTSE 100 higher, Qinetiq slides
The FTSE 100 index is 37.86 higher at 7,179.68 amid a strong session for mining stocks, with Anglo American and Glencore setting the fastest pace after gains of more than 2%.
The domestic-focused FTSE 250 index improved 150.18 points to 22,785.45, led by former Premier Oil business Harbour Energy after oil prices edged up overnight.
Electronics firm discoverIE was also 5% higher following a better-than-expected trading update.
Shares in defence specialist Qinetiq skidded 9%, however, as it revealed its performance in US Global Products has been affected by the transition to the Biden presidency and shift in priorities from counter-insurgency missions in Afghanistan to threats in the Indo-Pacific.
Slow recovery for motor insurer
Sabre Insurance, which sells policies through brokers and its direct brands Go Girl and Insure 2 Drive, said the recovery in motor insurance pricing has been slightly slower than it expected as Covid-related restrictions unwind.
Its business is heavily focused towards new business and new drivers, so the backlog of driving tests and significant delays in new car registrations haven’t helped.
Sabre said: “We have chosen not to engage in inappropriate price discounting to chase volume during this period, instead maintaining pricing discipline in order to preserve the strength of the business across the medium-term.”
It expects prices to pick up over the coming year as Covid discounts applied to policies for periods of reduced traffic unwind and as the industry responds to a significant period of cost inflation. Sabre’s shares fell 2p to 193p in the FTSE All-Share.
Stelrad confirms float plan
A difficult start to trading for Czech trucking services firm Eurowag and the decision of roofing tiles business Marley to postpone its float due to market volatility has shaken the outlook for initial public offerings (IPOs) in recent days.
Radiators firm Stelrad defied these jitters today to confirm its £350 million London float will go ahead next month, saying the “interest we’ve received from potential investors has been significant”.
Rubix, whose products help to keep the factories and plants of some of Europe’s largest industrial companies up and running, also announced it is considering an IPO on London’s main market.
Wall Street earnings
Banking giant JP Morgan Chase got Wall Street’s third quarter earnings season off to a strong start yesterday when it delivered forecast-beating results, driven by the recent boom in M&A activity and release of more loan loss reserves.
Net income rose 24% to $11.7 billion, aided by a 30% rise in revenues at its investment banking and markets division.
Chief executive Jamie Dimon said: “JPMorgan Chase delivered strong results as the economy continues to show good growth – despite the dampening effect of the Delta variant and supply chain disruptions.”
The shares have risen by 28% so far this year, but closed yesterday more than 2% cheaper amid a weaker performance across the banking sector.
Bank of America, Citigroup and Morgan Stanley are due to post their results later today.
European stock markets are expected to open higher this morning following a steady performance by US and Asian markets overnight.
The focus continues to be on inflation after it emerged that headline US consumer prices rose by 0.4% on a monthly basis in September, the fifth time in the last seven months that the figure has come in above the median estimate.
Deutsche Bank’s senior analyst Jim Reid said the CPI release only added to speculation that the Federal Reserve may be forced into hiking rates earlier than previously anticipated.
He added: “Investors are now pricing in almost four hikes by the end of 2023, which is over a full hike more than they were pricing in just a month earlier.”
The jitters were evident in markets overnight as the traditional inflation hedge of gold posted its strongest daily performance since March.
China bucked the inflation trend overnight with official figures showing a fall in the annual rate in September to 0.7% from 0.8%. This was offset, however, by a rise in the producer prices index to 10.7%, the highest since records began to show that inflationary pressures still persist in the China value chain.
Oil prices edged higher overnight to leave Brent crude futures at $83.73 and West Texas crude oil at $80.96.
The rise came despite OPEC’s monthly oil market report revising down its forecast for world oil demand this year. European natural gas prices were also up 9% as they continue to pare back some of the declines following Vladimir Putin’s intervention last week.
According to CMC Markets, the FTSE 100 index is forecast to open 35 points higher at 7,176.