Saga falling short of full-year target, Diageo projects stronger 2017

London open

The FTSE 100 is expected to open up 32 points on Wednesday, after closing up 0.25% to 6,830.79 on Tuesday.

Stocks to watch

First-half profits at Saga were short of management's full year target but the interim dividend was upped by almost a quarter to compensate. Trading profits of £117.6m in the six months ended 31 July were up only 2% due in part to a payments for the Saga Sapphire cruise ship, while pre-tax profits rose 3.9% to £104.5m. An interim dividend of 2.7p was proposed, up 23% on last year's.

Interserve announced on Wednesday that its construction joint venture Khansaheb has been awarded an £81m contract by Middle East developer Majid Al Futtaim, to expand and upgrade the City Centre Ajman mall in the United Arab Emirates. The London-listed firm said that under the contract, Khansaheb will more than double the size of the existing mall from 32,000 square metres to 70,000 square metres, expand a number of retails units and build a new car park, creating 2,400 new parking spaces. The contract also includes the addition of new mechanical and electrical installations to serve the expanded mall, the creation of new walkways, food courts, offices and a children's entertainment venue.

Smirnoff, Guinness and Baileys producer Diageo is set to deliver a “stronger” performance for the 2017 financial year due to the strengthening of marketing, innovation and commercialisation of products, the chief executive said ahead of the shareholder meeting on Wednesday. Sales from scotch, US spirits and expansion in India were identified as key areas for growth in the current financial year.

Newspaper round-up

The family behind River Island has chosen not to take a multi-million pound dividend in favour of pumping investment into the fashion retailer’s online and IT systems instead.Ben Lewis, chief executive, told The Daily Telegraph that the board has decided to focus on investing profits back into the business amid a challenging time for the retail sector. - Telegraph

The Bank of Japan has launched an unprecedented new kind of monetary easing as it set a cap on 10-year bond yields and vowed to overshoot its 2 per cent inflation target on purpose. Its decision demonstrates that even eight years after the global financial crisis, central bankers are still willing to experiment with new monetary policy tools, as they struggle to escape from low inflation around the world. - Financial Times

Royal Bank of Scotland’s sale of a smaller lender to Santander is on the brink of failure after talks broke down over the price of the business. RBS now faces the threat of a potential fine or forced sale of the business, known as Williams & Glyn, to meet its state aid obligations imposed by the European Commission in return for its £46 billion financial crisis bailout. - The Times

US close

US stocks ended little changed on Tuesday as investors exercised caution ahead of rate announcements from the Federal Reserve and the Bank of Japan.

The Dow Jones Industrial Average and the Nasdaq ended just 0.1% firmer, while the S&P 500 closed flat.

At the same time oil prices were just a touch ahead. West Texas Intermediate was up 0.3% at $43.44 a barrel while Brent crude was up 0.2% at $46.06.

Investors were reluctant to make any bold moves ahead of policy decisions from the Federal Open Market Committee and the BoJ on Wednesday.

The US central bank is widely expected to keep interest rates unchanged, while BoJ officials have suggested in recent weeks that there is room to cut rates further after taking them into negative territory for the first time earlier this year.

“While the FOMC is typically the most keenly followed central bank in the world, they risk being overshadowed tomorrow owing to the uncertainty and range of options open to the BoJ,” said Joshua Mahony, market analyst at IG.

“The decreasing liquidity available to the BoJ, coupled with the existence of negative rates means that Kuroda has little room for manoeuvre.

“With speculation that the BoJ will seek to steepen the yield curve by focusing more on the short term bonds, and rumours that we could see the bank focus on deeper negative rates at the expense of QE, the market uncertainty means we could see significant volatility ahead of tomorrow’s open.”