Mondi expecting improved profits, Burberry beats City forecasts
London open
The FTSE 100 is expected to open 18 points lower on Wednesday, having closed up 0.16% at 7,722.98 on Tuesday.
Stocks to watch
Paper products maker Mondi said it expected first quarter underlying operating profit to be 15% higher year on year at €295m and 6% up on the fourth quarter of 2017. Higher average selling prices and profit improvement initiatives across the group more than offset higher operating costs, the impact of maintenance shuts and negative currency effects.
Burberry presented a smart but not swanky first set of full year results under new chief executive Marco Gobbetti, beating City forecasts despite a 1% fall in revenues. Adjusted operating profits of £467m in the 12 months to 31 March were up 2% on the previous year, or 5% at constant exchange rates and ahead of £453m.
Paddy Power Betfair confirmed it is in talks over a potential merger of its US business and US-based FanDuel to target the market that will open up following the Supreme Court's overturning of a federal ban on sports betting. The FTSE 100-listed bookmaker said discussions are ongoing and there is no certainty as to whether agreement will be reached, or as to the terms or timing of any transaction.
Software group Micro Focus International updated the market on its trading performance for the six months ended 30 April on Wednesday, saying it expected to report revenues better than the management guidance of -9% to -12% on a constant currency basis, compared to the proforma six months ended 30 April 2017. The FTSE 100 firm did caution that those figures included an “unusually large” licence deal of approximately $40m, which closed earlier than expected Excluding that deal, the group's underlying revenue was towards the better end of the guidance range.
Newspaper round-up
Carillion collapsed as a result of “recklessness, hubris and greed” among directors who put their own financial rewards ahead of all other concerns, according to an excoriating report into the firm’s demise that spreads the blame between board members, the government, accountants and regulators. The company, which managed huge construction projects and provided government services ranging from school meals to prison maintenance and NHS cleaning, slumped into insolvency in January. More than 2,000 people have since been made redundant. - Guardian
Amazon has threatened to move jobs out of its hometown of Seattle after the city council introduced a new tax to try and address the homelessness crisis. The world’s second-biggest company has warned that the “hostile” tax, which will charge firms $275 per worker a year to fund homelessness outreach services and affordable housing, “forces us to question our growth here”. – Guardian
Energy bill payers will be forced to stump up an extra £1.5bn for their energy over the next fifteen years after a tweak to the Government’s auction for low-carbon power subsidies backfired. The National Audit Office said the rule changes made to last year’s auction for contracts to support new, low-carbon power projects mean that energy users will be on the hook for an extra £100m a year. – Telegraph
Thomson Reuters is shifting its $300bn-a-day foreign exchange derivatives trading business from London to Dublin, in a bid to ensure the company can continue to sell services into the European Union after Brexit. The move, to take place before the UK leaves the EU next year, will not result in any jobs being cut in London and the computer systems will remain in London, the company said. More jobs will, however, open up in Dublin. – Telegraph
The United States has threatened the European Union with billions of dollars of import duties if it fails to honour a World Trade Organisation ruling to stop providing illegal subsidies to Airbus. The WTO said in a report yesterday that Britain, Germany, France and Spain also had provided illegal subsidies to the aircraft maker and, like the EU, had failed to comply with a ruling two years ago to stop. The report came nearly 14 years after America brought the dispute to the WTO at the behest of Boeing, Airbus’s closest rival. – The Times
Concerns have been raised over plans by the former director of the Serious Fraud Office to join a law firm that has represented some of the biggest companies he has prosecuted. Legal sources said that David Green, who stepped down as head of the fraud office after six years in March, will have to be “ring fenced” if he joins Slaughter and May, to prevent possible conflicts of interest. – The Times
US close
Wall Street finished with all three main indices in the red on Tuesday, ending a lengthy streak of gains, as the yield on the 10-year Treasury note crept to 3.08%, its highest level since 2011, amid ongoing worries about trade talks between the US and China.
The Dow Jones Industrial Average ended down 0.78% at 24,706.41, the S&P 500 slipped 0.68% to 2,711.45, and the Nasdaq 100 was off 1.09% at 6,888.54.
Comments from US Commerce Secretary Wilbur Ross expressing confidence that the US had the upper hand in trade talks with China, claiming that the gap between the two "remains wide", did very little to help sentiment.
In economic news, the Empire State manufacturing index rose from the 15.8 recorded in April to a reading of 20.1 in May, the New York Fed said Tuesday.
The figure was considerably better the 15.5 reading expected by economists, with one analyst describing it as "solid".
A reading on US retail sales volumes for April edged past forecasts, thanks to upwards revisions to data for prior months.
US business inventories for March on the other hand came in below forecasts, falling to their lowest level since October 2017, according to the Commerce Department.