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FTSE 100 Closed Up 0.5% as Pelosi Leaves Taiwan -2-

1044 GMT - Taylor Wimpey's first-half numbers are solid, it has sold in advance most of its expected volumes for 2022, with the orderbook looking packed and shares cheap, Goodbody says. The house builder has reported that customer interest remains buoyant, cancellations are still low and forward-looking metrics look strong, Goodbody analyst Shane Carberry says in a research note. "We do... recognize that the slowing sales rate in recent weeks may prove to be a focus for some investors but the rationale as to why it has slowed makes sense--i.e. managing the order book--in our eyes and whilst it is certainly something to watch, it is not yet a worry for us," the Irish brokerage says. Goodbody retains its buy recommendation on the stock, which it says offers significant value. Shares are up 4.4% at 125.3 pence. (joseph.hoppe@wsj.com)

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Taylor Wimpey's 1H Results Impress Despite Market Skepticism

1027 GMT - Taylor Wimpey's first-half results were undeniably impressive, and unlike some of its peers it is both on track to hit volume targets and is outpacing inflationary and interest-rate pressures for now, AJ Bell says. The house builder has however, like the rest of the sector, had its shares sold off throughout 2022, suggesting the market reckons they can't win this race forever, AJ Bell investment director Russ Mould says in a research note. That said, Taylor Wimpey has a strong balance sheet, it has invested in land at attractive prices and--paired with the long-standing supply and demand imbalance in the U.K. housing market--there's at least some confidence in the long-term outlook, the brokerage says. Shares are up 4.5% at 125.4 pence. (joseph.hoppe@wsj.com)

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Taylor Wimpey's Strong Results Lead to Forecast Upgrades

1012 GMT - Taylor Wimpey's first-half results came in slightly ahead of expectations, and the company expects full-year operating profit to be at the top end of the market consensus range driven by strong pricing, Credit Suisse says. The house builder's strong results and upgraded guidance leads the Swiss bank to raise its 2022 Ebit estimate to GBP921 million, 2.5% ahead of the market consensus. "Although July sales rates look weak, we view this as a function of both an already long order book--89% sold for the year--and the prioritization of price over volume, supporting margin expectations into 2023," CS analysts say in a note. CS retains its outperform rating and 210 pence price target on the stock. Shares are up 4.5% at 125.4 pence. (joseph.hoppe@wsj.com)

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Serco Looks Set to Benefit From Inflationary Tailwinds

1008 GMT - Serco Group's potential to benefit from accelerating growth in U.S. defense spending and the expansion of the U.S. Navy is underappreciated by the market, Citi says. The U.K. outsourcing company's vast majority of contracts provide some kind of inflation protection, and with inflationary increases applying on the anniversary of contracts being signed, it's reasonable to expect results to benefit from at least a mid-single-digit inflation tailwind, Citi analysts say in a research note. Serco is scheduled to report its first-half results on Thursday, and "we expect Serco to highlight improved [foreign exchange] and inflationary tailwinds across its business," the U.S. bank says. Citi retains its buy rating on the stock and 244 pence price target. Shares are down 1.4% at 184.1 pence. (joseph.hoppe@wsj.com)

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Sterling Unlikely to Be Affected by UK Leadership Race

1006 GMT - Sterling is unlikely to be affected by the U.K. Conservative Party's leadership race between Liz Truss and Rishi Sunak, Commerzbank says. Truss is the favorite to become prime minister in the polls but she probably isn't the market's preferred choice as she has a more free-spending policy stance, takes a tough line against the EU and wants to evaluate the Bank of England's mandate, Commerzbank currency analyst Antje Praefcke says in a note. Political interference in monetary policy isn't popular in the currency market, she says. However, there's no reason for sterling weakness before the leadership contest final outcome, she says. "Even afterwards there is unlikely to be a huge change in Tory policy if Truss really does win." (renae.dyer@wsj.com)

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Taylor Wimpey Gains as Higher Prices Offset Cost Rises

0952 GMT - Shares in Taylor Wimpey top the FTSE 100 risers, up 4%, and other U.K. house-builders gain after Taylor reported higher first-half pretax profit and forecast full-year operating profit at the top end of market expectations. "This was a good set of numbers against the backdrop of record performance last year," Hargreaves Lansdown analyst Matt Britzman says in a note. "There's still a structural supply/demand imbalance in the U.K. propping up prices despite consumer spending power falling. Cost inflation remains a thorn, running around 9-10% but fully offset by higher prices for now. It remains to be seen how long that can continue, but while it does, shareholders can continue to expect solid returns." (philip.waller@wsj.com)

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BOE Expected to Lift Interest Rates More Decisively, Set Out Active QT

0905 GMT - The Bank of England is likely to act more forcefully against high inflation at Thursday's meeting with a 50-basis-points interest rate increase, Goldman Sachs Asset Management says. The central bank also looks set to say it will begin active quantitative tightening in October at a quarterly pace of GBP10 billion, Goldman macro strategist Gurpreet Gill writes. The BOE will probably raise its short-term and medium-term inflation forecasts while cutting its 2022 economic growth forecasts, she says. The BOE will remain data-dependent with its policy decisions and willing to act aggressively if high inflation persists, she says. "Despite the risks to growth, firm inflation and a tight labor market are supportive of further tightening beyond this month's meeting." (renae.dyer@wsj.com)

 

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(END) Dow Jones Newswires

August 03, 2022 13:03 ET (17:03 GMT)

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