LONDON MARKET OPEN: TUI Up After Affirming Outlook; UK Inflation Ahead

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LONDON (Alliance News) - Stocks in London opened flat to higher on Tuesday, with TUI Group leading blue-chip risers after maintaining its forward guidance, while the pound was firm ahead of the UK inflation reading for January.

The FTSE 100 index was up 0.1%, or 4.36 points, at 7,181.91 early Tuesday. The mid-cap FTSE 250 index was flat at 19,383.45. The AIM All-Share index was flat at 1,017.53.

The BATS UK 100 index was flat at 12,196.44%. The BATS 250 was flat at 17,636.01%, and the BATS Small Companies was up 0.1% at 12,166.33.

"Overall, the European markets and US future are looking strong today with the help of a strong positive momentum and thanks to the stabilising sentiment among bond traders," said ThinkMarkets analyst Naeem Aslam.

"Remember the sell-off was triggered due to the qualm around higher inflation. The tax cuts which Trump administration brought in the sunlight has fuelled worries amid investors that inflation would be running hot. Ironically enough though we had no such concerns when this process started and now in a matter of weeks, inflation became the very reason for the sell-off which we experienced," Aslam added.

On the London Stock Exchange, TUI was the best performer at the open, up 2.3%, after the Anglo-German travel operator reiterated its guidance for its current financial year, following a narrowed loss and strong business growth in its first quarter.

For the quarter to the end of December, TUI reported a pretax loss of EUR72.5 million, narrowed from EUR103.3 million for the same period a year before, as the Hotels & Resorts division nearly doubled its earnings before interest, tax and amoritisation to EUR94.4 million from EUR49.2 million.

There was also strong double-digit growth from the Holiday Experiences and Cruises segments, more than offsetting the losses from Sales and Marketing, and all other segments, as well as higher administrative costs. Revenue for the period grew 8.1% to EUR3.55 billion from EUR3.28 billion the prior year, with sales rising 9.1% in constant currencies. Across all regions, customer numbers rose by 4.4% year-on-year.

TUI said it will continue to expand its Hotels and Cruises divisions and affirmed its guidance for 3.0% growth in revenue 10% growth in underlying earning before interest, tax and amortisation on a constant currency basis for the year ending September 30.

"Our strategy is successful. Our focus is on hotels and cruises. While we used to be a trading company, we have now become developers, investors, and operators. This makes TUI more profitable, and we now generate our earnings more evenly across twelve months," said Chief Executive Officer Fritz Joussen.

Smiths Group was the second best performer at the open, up 2.0% after Barclays started coverage on the engineer with an Overweight rating.

Anglo American was up 1.1% after the miner's subsidiary Kumba Iron Ore said that it made a strong financial and operational performance in 2017, with revenue and profit both increasing.

Revenue increased by 16% to ZAR46.4 million for the year to December 31 from ZAR40.2 million in 2016, mainly as a result of an 11% rise in the average realised iron ore export price to USD71 per tonne and a 6% higher sales volume. Pretax profit grew by 44% to ZAR21.7 million, from ZAR15.1 million in 2016.

Total production increased by 8% to 45.0 million tonnes from 41.5 million tonnes in 2016, despite a challenging first quarter, Kumba said. Full year production guidance for 2018 is between 44.0 and 45.0 million tonnes, of which the Sishen mine is expected to produce between 30.0 and 31.0 million tonnes of product and mine between 170.0 and 180.0 million tonnes of waste.

Anglo American owns 68.7% of Kumba. It reports its own 2017 results on Thursday next week.

Sterling was quoted at USD1.3856 early Tuesday, slightly higher than USD1.3805 at the London equities close on Monday, ahead of UK inflation data for January at 0930 GMT.

The UK consumer price index reading is expected to come in at 2.9% year-on-year compared to 3.0% in December. On a monthly basis, consumer prices are expected to fall 0.6% following an 0.4% increase in December.

"If the inflation number does start to tick higher again, it would increase the pressure on the BoE to tweak it's monetary policy. This means another increase in the interest rate and that would not be a welcoming sign for the UK's economy. The BoE's governor has indicated and has prepared the market to some extent that inflation could tick higher which is a big change in his earlier stance. The only safety net for the BoE could hope for is the bounciness in the wages and the wages should continue to show the same sort of resilience as they have over in the US," said Aslam.

In mainland Europe, the CAC 40 in Paris was up 0.3% while the DAX 30 in Frankfurt was up 0.1% early Tuesday.

The euro was quoted at USD1.2317 early Tuesday, up from USD1.2272 at the European equities close Monday.

The Japanese Nikkei 225 index ended down 0.7% early Tuesday. In China, the Shanghai Composite closed up 1.0%, while the Hang Seng index in Hong Kong closed up 1.3%. Stock markets in Japan reopened following the National Foundation Day holiday on Monday.

Asian economic news producer prices in Japan picked up 0.3% on month in January, the Bank of Japan said. That was in line with expectations and up from the downwardly revised 0.1% gain in December - originally 0.2%. On a yearly basis, producer prices advanced 2.7% - matching forecasts and down from the downwardly revised 3.0% in the previous month, which was originally 3.1%.

By Arvind Bhunjun; [email protected]

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