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FTSE Edges Higher, Investor Caution Over Pound Seen as Justified

06/16/2021 | 09:33am EDT

Investor Caution Over Pound Seen as Justified

The pound's resilience to the U.K. government's decision to delay the lifting of England's remaining coronavirus restrictions isn't a reason to become more optimistic about the currency, Validus Risk Management says. Overall investor positioning on sterling remains net long, expecting it to rise, which leaves the currency vulnerable to declines if those positions are unwound so an "element of caution remains justified," Validus analyst Marc Cogliatti says. The fact that GBP/USD has struggled to build upward momentum also gives cause for concern, he says. Meanwhile, a renewed risk facing the U.K. economy and sterling is the potential for a trade war between Britain and the EU over the Northern Ireland protocol, he says.

 
Companies News: 

Best of the Best Shares Tumble on Declining Customer Engagement -- Update

Shares in Best of the Best PLC fell Wednesday after the company warned of declining customer engagement amid easing restrictions in the U.K.

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Origin Enterprises Sees FY 2021 Adjusted EPS on the Rise Despite Lower 3Q Revenue

Origin Enterprises PLC said Wednesday that it expects adjusted diluted earnings per share for fiscal 2021, following a decent third quarter given the inclement weather.

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Severfield FY 2021 Pretax Profit Fell

Severfield PLC said Wednesday that pretax profit fell for fiscal 2021 after booking higher costs, and that its high-quality order book for the U.K. and Europe supports continued growth throughout fiscal 2022 and beyond.

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Castings FY 2021 Profit, Revenue Fell on Covid-19 Disruptions

Castings PLC said Wednesday that pretax profit and revenue fell in fiscal 2021 as the coronavirus pandemic caused disruptions, but that it is now back to full production.

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Renold Shares Fall on FY 2021 Accounts Delay; Trading in Line with Views

Shares of Renold PLC fell as much as 12% on Wednesday after the company said that its fiscal 2021 earnings will be delayed while its auditors complete the audit process.

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Oilex Appoints Roland Wessel as CEO

Oilex Ltd. said Wednesday that Roland Wessel has been appointed chief executive officer effective June 16, and that Managing Director and Interim Chairman Joe Salomon will assume the position of executive chairman for an interim period.

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Political Summits Signal International Focus on Ransomware

The attention of world leaders to ransomware in a series of high-level meetings highlights how quickly the destructive cyberattacks have climbed the political agenda as a string of recent attacks disrupted companies and critical infrastructure in the U.S. and other countries.

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Invesco Star Fund Manager Duo to Retire From Fixed Income Team -- Financial News

Of Financial News

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UK Regulator Accepts Undertakings for Asda Takeover

The U.K. Competition and Markets Authority said Wednedsay that it has accepted undertakings from the Issa Brothers and TDR Capital LLP for the acquisition of U.K. grocer Asda Group.

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PureTech Health Buys Remaining Interest in Alivio Therapeutics

PureTech Health PLC said Wednesday that it has acquired the remaining 22% stake in Alivio Therapeutics Inc., which it founded, to leverage its strength in immunology and related technologies to potentially treat inflammatory diseases.

 
Market Talk: 

Electra Private Equity Likely to Capitalize Assets Ahead of Listings

1249 GMT - Electra Private Equity should benefit from the structural changes made to TGI Fridays, which have led to an encouraging start to proforma trading, Liberum says. The U.S.-themed restaurant chain --which represents 87% of Electra's remaining assets-- intends to add five more stores per year which can be self-funded from cash generation, Liberum says. The investment group is expected to use a significant proportion of its cash balance of around GBP28 million to ensure TGI Fridays and footwear brand Hotter Shoes are well capitalized ahead of their upcoming listings, the broker says. The company will likely pay down some of TGI Fridays' debt prior to the demerger taking place later in the year, the broker says.

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Higher UK Inflation Expected to Stoke Hawkish Policy Talk

1246 GMT - Rising U.K. consumer prices may fuel a more meaningful conversation about tightening monetary policy, says Bank of America. While investors may feel tempted to expect the Bank of England to follow other central banks and look through inflation news, the U.S. bank warns that the BOE has much more limited guidance, "setting itself up to be more reactive than other central banks," U.K. economists Robert Wood says. "Stronger inflation will lead to more hawkish talk in our view." BofA has raised its 2021 consumer price index inflation forecast 4 basis points to 1.8% and core inflation by 10bp to 1.6%.

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Chance of BOE Raising Rates in 3Q22 Increasing

1207 GMT - The probability of an interest rate rise in the third quarter of 2022 has been increasing despite easing market inflation expectations, says Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson Investors. The release Wednesday of inflation data showing a 2.1% jump in consumer prices in May has so far given sterling a bit of a lift, but 10-year gilt yields have declined, he says. Similarly, despite the spikes in realized inflation, global concerns about the sustainability of price pressure seem to have eased recently, leading to slightly lower longer-term breakeven rates, a measure of market-based inflation expectations, he says. "Accompanied by a general decline in real bond yields, this has led to lower nominal sovereign bond yields in many developed markets."

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UK Lockdown Extension Likely to Counterbalance Inflation Risk

1137 GMT - An extension of the current social restrictions in the U.K. suggests the risks to the economy are more balanced ahead of next week's Bank of England meeting, says Societe Generale. "GDP looks set to rise by about 5% in 2Q, and inflation to reach 1.8%, both a little above the Bank's latest forecasts, and unemployment continues to fall whereas the Monetary Policy Committee had predicted gentle increases," he says. However, a delay in lifting the remaining lockdown restrictions by four weeks signals "the risks are not all on one side," economist Brian Hilliard says. "The MPC is nowhere near ready to tighten policy but we expect Andy Haldane... to vote again for a reduction in the target asset stock," he says.

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U.K.'s Inflation Rise Might Spook Investors Despite BOE Assurances

1133 GMT - The U.K.'s sharp spike in inflation was inevitable as the government freed the country's economy from the shackles of the lockdown, Ben Laidler at eToro says. Rising inflation will spook some investors who will see soaring prices as a sign that a rate rise is coming closer, Laidler says. Still, it would appear we are not at that point yet as the Bank of England has continuously stated that it sees the most recent bought of inflation as transitory or, in other words, temporary, he says. "Wages are set to grow slower than prices and therefore this will act as a natural cap on inflation in the coming months," Laidler says.

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Temporary Spike in Inflation Shifts ECB's Focus on Negotiated Wage Hike

1124 GMT - The European Central Bank sees the pickup in inflation in 2021 as completely temporary; therefore, where inflation will peak is not the most relevant factor to watch, Marchel Alexandrovich, senior European economist at Jefferies, says in a webinar. "The ECB, but also the BOE, will follow how large is the negotiated wage increase," he says. "It's less relevant where inflation will peak," he says.

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Christie Group's Continued Recovery Should Lead to Outperformance

1123 GMT - Professional-services provider Christie Group's update going into the second half has a positive tone and investors should expect further outperformance in the share price, Shore Capital says. "We are pleased to see that the recovery first seen in the second half of 2020 has continued to date with the anticipation if the current momentum is maintained of a strong second half performance," the investment group says. Shore forecasts Christie to return to an operating profit of GBP3.5 million in fiscal 2021 and GBP4.6 million in fiscal 2022, and says the update adds to the view Christie can operate from a lighter, more flexible cost base without reducing capabilities or capacity. Shares are up 4.8% at 119.5 pence.

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Rising Inflation Isn't Just a US Phenomenon as UK Inflation Climbs

1122 GMT - The U.K.'s annual inflation reading, which exceeded the Bank of England's 2% target, shows that the specter of rising inflation isn't just a U.S. phenomenon, Pete Drewienkiewicz at Redington Ltd. says. The U.K. is at an earlier stage of the cycle after pressing the pause button on economic reopening earlier in the week, Drewienkiewicz says. "We are seeing similar dynamics play out with a high level of job vacancies remaining unfilled which increases the chances of wage inflation picking up over the coming months, putting the BOE under increasing pressure to act," Drewienkiewicz says.

Contact: London NewsPlus, Dow Jones Newswires; +44-20-7842-931

(END) Dow Jones Newswires

06-16-21 0932ET

Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / BRITISH POUND (AUD/GBP) 0.35% 0.54363 Delayed Quote.-4.01%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) 0.44% 0.64515 Delayed Quote.1.34%
BANK OF AMERICA CORPORATION 1.31% 47.09 Delayed Quote.53.35%
BRITISH POUND / EURO (GBP/EUR) 0.08% 1.18669 Delayed Quote.5.69%
CANADIAN DOLLAR / BRITISH POUND (CAD/GBP) 0.01% 0.587068 Delayed Quote.2.27%
CANADIAN DOLLAR / EURO (CAD/EUR) 0.09% 0.696743 Delayed Quote.8.13%
DJ INDUSTRIAL 0.43% 35609.34 Delayed Quote.15.20%
ELECTRA LIMITED -1.01% 200630 Delayed Quote.15.42%
ELECTRA PRIVATE EQUITY PLC 0.69% 584 Delayed Quote.106.41%
EURO / BRITISH POUND (EUR/GBP) -0.08% 0.8426 Delayed Quote.-5.36%
FINTECH ACQUISITION CORP. V 0.90% 10.11 Delayed Quote.0.00%
INDIAN RUPEE / BRITISH POUND (INR/GBP) 0.23% 0.009672 Delayed Quote.-3.27%
INDIAN RUPEE / EURO (INR/EUR) 0.27% 0.011473 Delayed Quote.2.19%
INVESCO LTD. 1.68% 25.42 Delayed Quote.43.43%
JANUS HENDERSON GROUP PLC 1.19% 45.12 Delayed Quote.37.16%
ORIGIN ENTERPRISES PLC -2.19% 3.12 Real-time Quote.2.90%
PURETECH HEALTH PLC -1.53% 354.5 Delayed Quote.-10.00%
RENOLD PLC 1.10% 27.6 Delayed Quote.115.81%
SEVERFIELD PLC 1.13% 71.6 Delayed Quote.1.43%
US DOLLAR / BRITISH POUND (USD/GBP) -0.24% 0.723312 Delayed Quote.-0.45%
US DOLLAR / EURO (USD/EUR) -0.15% 0.858458 Delayed Quote.5.17%
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