LONDON CLOSE
A torrent of trading updates from blue-chip companies provided plenty of impetus for the top-share index today.
The FTSE 100 rose 38 points to 6,669, with index heavyweight Royal Dutch Shell (LON:RDSB) leading the rise.
The Anglo-Dutch integrated oil company kept its legion of shareholders that hold the stock for income happy by committing to maintain the dividend next year at a level that matches or surpasses this year’s.
That was a concern because the company’s dividend cover is running perilously close to 1.0, plus it has to find the money to buy up BG Group (LON:BG.) – which rose 3.8% today – but it put many of those fears to rest by announcing job cuts and dramatic reductions in outgoings as it adjusts to the lower oil price environment.
The “B” shares – more widely held in the UK than the “A” shares – jumped 4.7% to 1,861p.
Also enjoying a spell in the sun was hotels operator InterContinental Hotels (LON:IHG), up 4.6% after solid interims.
The company is in talks with US rival Starwood Hotels & Resorts (NYSE:HOT) about a potential tie-up, it emerged on Thursday.
IHG is said to have held preliminary talks with Starwood about a merger that would create the world's biggest hotelier.
Drugs leviathan AstraZeneca (LON:AZN) also gave Footsie a shot in the arm, rising 3.1% to 4,319.5p, as second quarter revenue at constant exchange rates rose 2% although core operating profit fell 4%.
Jet engine maker Rolls-Royce (LON:RR.) climbed 19p to 749.5p as it cheered investors with unchanged guidance for annual revenue and profit despite posting a 32% fall in underlying pre-tax profit to £439mln.
Engineering firm Babcock (LON:BAB) was the worst performing heavyweight after a mostly positive AGM statement was soured by gloomy predictions about revenue it is likely to earn from the hard-pressed oil and gas sector.
The shares came off 5.2% at 985.5p, which meant the shares performed even worse than British Gas owner Centrica (LON:CNA), which fell 3.1% to 266.6p.
The utility company weighed in with thousands of job cuts as its British Gas arm made profits of £528mln in the six months to June 30, up 99% on the same period a year ago, but unlike Shell, its decision to lay off thousands did not cheer the market.
Royal Bank of Scotland (LON:RBS) shed early gains to finish 11p lower at 342.4p after reporting a better-than-expected increase in second quarter profit.
The majority state-owned bank has been restructuring after being rescued in the financial crisis and taking hits for PPI mis-selling and other controversies.
Also on the slide was BT (LON:BT.A), which fell 1.2% to 468p. The telecoms group reported higher profits and latest customer numbers for its new mobile and TV businesses, but investors were unimpressed.
Connor Campbell at Spreadex said: "This disappointment could perhaps be attributed to the 2% drop in revenue seen by the media company, a decline that becomes more egregious when compared to the staggering growth shown by Sky in its fiscal full year results yesterday."
Drinks group Diageo (LON:DGE) fell 28p to 1811p as it reported flat sales in 2015 prompted by declines in some of its markets.
US OPEN
Economic data is in focus on the other side of the pond after the Fed’s policy standstill yesterday and gross domestic product (GDP) figures today.
The Federal Open Market Committee’s (FOMC) statement yesterday was almost a cut-and-paste job of June’s statement, though some pundits detected a few signs the FOMC is becoming a tad more hawkish.
One change seized upon was the statement that the “underutilisation of labour markets has diminished”; last month it was “somewhat diminished”, which gives you some idea of the level of tea-leaf reading that is going on.
Meanwhile, US GDP for the second quarter rose at an annualised 2.3%, a sharp acceleration from a revised 0.6% growth rate in the first quarter.
Nancy Curtin, chief investment officer of Close Brothers Asset Management, commented: “This growth isn’t shooting the lights out by any means, but let’s not pretend that this will be enough to deter Yellen from a rates rise later this year. Yes, the Q2 bounce-back is more subdued than last year, but the hit to the economy in the first quarter was also more muted, despite the impact of bad weather and port strikes closures.
“Today’s reading is a sure sign that economy is moving in the right direction.
The economy may be moving in the right direction but for the balls, the benchmark indices are not; the Dow Jones index was off 91, or 0.5%, at 17,662 while the broader-based S&P 500 was also down 0.5% (11 points), at 2,09.
The tech heavy Nasdaq Composite was down 32 points, or 0.6%, at 5,080, with social media giant Facebook acting as a drag, after it posted a 39% rise in second quarter revenue to US$4.04bn from US$2.91bn in the same quarter of 2014.
Analysts had been expecting the purveyor of the thief of time service to earn 47 cents a share on around US$4bn in revenue, and after excluding certain expenses, Facebook topped those expectations with earnings per share of 50 cents.
LinkedIn, once described as Facebook for grown-ups, was also on the slide after its second quarter numbers attracted few “likes” from traders.
Old school media firm Time Warner Cable posted a 19% drop in adjusted earnings for the second quarter, which was worse than expected, but the cable TV firm still saw its shares defy the market and head higher.
Anheuser Busch InBev, best known for its Budweiser brand, left a sour taste in investors’ mouths after its profits declined in the second quarter.
Sales in US and Europe disappointed.
Groceries retailer Whole Foods Market was left on the shelf after earnings announced yesterday missed market expectations. The shares were among the worst performing blue-chips in early dealings.
MID-SESSION MARKET WRAP
London shares built on early gains on Thursday as results from heavy-hitters Royal Dutch Shell (LON:RDSB) and AstraZeneca (LON:AZN) cheered investors.
The FTSE 100 Index lifted 50 points to 6,680 as Shell announced lower profits and 6,500 job cuts as part of a drive to adjust to lower oil prices. Its shares rose 77p to 1,854p.
Shares in drug group AstraZeneca (LON:AZN) were 113.5p healthier at 4304.5p as second quarter revenue at constant exchange rates rose 2% but core operating profit fell 4%.
Shell and AstraZeneca were among scores of companies updating the market on what has popularly become known in the City as "Super Thursday".
This week is particularly busy because many companies whose half-years end in June prefer to report results before the August holiday season.
The Dow Jones Industrial Average was tipped to open lower ahead of US second quarter GDP numbers and jobless claim figures.
The Dow ended yesterday's session 121 points up at 17,751 as the US Federal Reserve failed to change interest rates and gave few clues about the timing of a rise.
Michael Moran at Daiwa Capital Markets said the Fed's policy statement was largely unchanged from June, although the few adjustments it made were positive.
"The shifts were not so pronounced as to signal a rate hike in September, but they implied that lift-off is drawing near," he said.
Back in London, a European Commission survey showed a historically high level of consumer confidence despite a slowdown in July.
The study also showed that inflation expectations rose in July, which is supportive to the case for the Bank of England to soon raise interest rates.
But it was corporate results that dominated the headlines.
BT (LON:BT.A) drifted 4.95p to 468.55p as the telecoms group reported higher profits and latest customer numbers for its new mobile and TV businesses.
Connor Campbell at Spreadex said: "This disappointment could perhaps be attributed to the 2% drop in revenue seen by the media company, a decline that becomes more egregious when compared to the staggering growth shown by Sky in its fiscal full year results yesterday."
Centrica (LON:CNA) also weighed in with thousands of job cuts as its British Gas arm made profits of £528mln in the six months to June 30, up 99% on the same period a year ago. Shares fell 6.7p to 268.5p.
Jet engine maker Rolls-Royce (LON:RR.) gained 18p to 748.5p as it cheered investors with unchanged guidance for annual revenue and profit despite posting a 32% fall in underlying pre-tax profit to £439mln.
Defence group BAE Systems (LON:BA.) ticked up 4.1p to 473.7p on news of higher sales but a slight fall in underlying earnings.
Chief executive Ian King said: "BAE Systems is well positioned to benefit from a generally improving market environment."
Drinks group Diageo (LON:DGE) fell 18p to 1821.5p as it reported flat sales in 2015 prompted by declines in some of its markets.
Royal Bank of Scotland (LON:RBS) shed early gains to fall 2.3p to 350.9p after reporting a better-than-expected increase in second quarter profit.
The majority state-owned bank has been restructuring after being rescued in the financial crisis and taking hits for PPI mis-selling and other controversies.
Mike van Dulken at Accendo Markets said the profit rise came "despite booking a £1.05bn restructuring charge (double that of Q1) and having to make another £459m provision for future wrist-slapping."
Electronics group Laird (LON:LRD) jumped 55p to 404.8p as it boosted revenue by 21% and underlying pre-tax profit by 36% to £26.9mln, but business support services group Xchanging (LON:XCH) plunged by more than a fifth, or 28.75p, to 97.5p on news of a poor performance by its procurement arm.
MOST FOLLOWED
Traders in the City normally love job cuts.
Not when they happen to them, of course, but news of a fabulously profitable multi-national company laying off thousands of people is usually cause for fingers to hit the ‘buy’ button in the hard-nosed dealing rooms.
This morning Centrica (LON:CNA), which trades under the British Gas and Scottish Gas brands, announced it is to cut 6,000 jobs while Royal Dutch Shell (LON:RDSB) saw Centrica’s 6,000 and raised it to 6,500.
The market liked Shell’s update, and disliked Centrica’s, and the reasons go beyond the job cuts.
Centrica, the gas and electric utility group today revealed a 2% reduction in revenue for the first half of its financial year, to £15.4bn from £15.74bn, and operating profit fell 3% to £1bn.
The losses came from the group’s upstream activities, whereas ‘customer facing’ businesses like British Gas were more profitable than last year.
The shares fell about 3%, whereas Shell’s shares went up by about the same amount, as it committed to paying a dividend of US$1.88 this year and to at least maintain the dividend at that level next year.
A deal between Sainsbury’s (LON:SBRY) and Lloydspharmacy could be the shape of things to come in the troubled supermarket sector.
The supermarket chain is selling its pharmacy business to Lloydspharmacy, the UK’s second largest chain of chemists, for £125mln.
It seems a good deal for Sainsbury’s, which, like most of the big four supermarket chains, has more floor space in its bigger supermarkets than it probably needs, as it will also charge Lloydspharmacy rent for the 277 in-store pharmacies acquired as part of the deal.
All of the pharmacies will be rebranded under the Lloydspharmacy marque.
With a veritable deluge of results from blue-chip companies today, for a small cap company to gain some coverage it has to either release some astoundingly good news or some rank bad news.
For All Leisure Group (LON:ALLG), sadly, it is the latter. The shares tanked as the cruises operator revealed half-year losses of £12.0mln, which was at least an improvement on the previous year’s loss before tax of £15.4mln.
Geo-political events continue to affect the business adversely; particularly in Russia, the Ukraine and Black Sea.
“Our Escorted Tour programme to Russia has been cancelled as a consequence of the onerous new visa regulations, which deterred our customers from booking,” the company said.
These days an armed escort tour might be more appropriate.
Hats off to accesso Technology (LON:ACSO), the theme park ticketing specialist, which has been a trifle unfortunate in the timing of some excellent news, though to be fair, the market has picked up on its global deal with Merlin Entertainments (LON:MERL), and marked the shares up sharply.
The company, which takes the waiting out of queuing, has raised profits guidance for the next two-and-a-half years.
LONDON OPEN
Investors gave a cautiously positive response to a tidal wave of blue-chip corporate results on Thursday.
The FTSE 100 Index lifted 15 points to 6,646 as companies ranging from Royal Dutch Shell and Centrica to BT and Diageo updated the market.
The Dow Jones Industrial Average ended yesterday's session 121 points up at 17,751 as the US Federal Reserve failed to change interest rates and gave little away about when a rise might come.
Michael Moran at Daiwa Capital Markets said the Fed's policy statement was largely unchanged from June, although the few subtle adjustments it did make were positive.
"The shifts were not so pronounced as to signal a rate hike in September, but they implied that lift-off is drawing near," he said.
Back in London, it was corporate results that dominated the early headlines. Royal Dutch Shell (LON:RDSB) spurted 44p to 1,821p as it announced lower profits and 6,500 job cuts as part of a drive to adjust to lower oil prices.
BT (LON:BT.A) drifted 12.05p to 461.45p as the telecoms group reported higher profits and latest customer numbers for its new mobile and TV businesses.
Connor Campbell at Spreadex said: "This disappointment could perhaps be attributed to the 2% drop in revenue seen by the media company, a decline that becomes more egregious when compared to the staggering growth shown by Sky in its fiscal full year results yesterday."
Centrica (LON:CNA) also weighed in with thousands of job cuts as its British Gas arm made profits of £528mln in the six months to June 30, up 99% on the same period a year ago. Shares fell 5p to 270.2p.
Jet engine maker Rolls-Royce (LON:RR.) gained 9p to 739.5p as it cheered investors with unchanged guidance for annual revenue and profit despite posting a 32% fall in underlying pre-tax profit to £439mln.
Defence group BAE Systems (LON:BA.) ticked up 3p to 472.6p on news of higher sales but a slight fall in underlying earnings.
Chief executive Ian King said: "BAE Systems is well positioned to benefit from a generally improving market environment."
Drinks group Diageo (LON:DGE) fell 7.5p to 1,832p as it reported flat sales in 2015 prompted by declines in some of its markets.
Royal Bank of Scotland (LON:RBS) rang up 5p to 358.2p after reporting a better-than-expected increase in second quarter profit.
The majority state-owned bank has been restructuring after being rescued in the financial crisis and taking hits for PPI mis-selling and other controversies.
Mike van Dulken at Accendo Markets said the profit rise came "despite booking a £1.05bn restructuring charge (double that of Q1) and having to make another £459mln provision for future wrist-slapping."
Shares in drug group AstraZeneca (LON:AZN) were 91.5p healthier at 4,282.5p as second quarter revenue at constant exchange rates rose 2% but core operating profit fell 4%.
MARKET PREVIEW
UK stocks are set for a lukewarm response to a rally on Wall Street.
New York’s key benchmarks closed out Wednesday in positive territory. The Dow Jones gained 121 points, 0.7%, to finish at 17,751 while the S&P 500 added 0.73% to 2,108.
Earnings season kept attentions on the NASDAQ’s tech stocks with the benchmark ending the session 0.4%.
Facebook (NASDAQ:FB), which released its second quarter results, was up 1.8% in the regular trading but fell back 3.3% to US$93.76 in ‘after hours’ exchanges.
Financials beat Wall Street analyst expectations, albeit slightly, thanks largely to bigger than anticipated ad revenues; for example 50 cent earnings (with certain exclusions) per share on US$4bn of revenue, versus consensus of 47 cents off US$3.99bn
Nevertheless the social media group, which now has 1.49bn users worldwide, also revealed more rudimental figures that still leave plenty of room for improvement; headline profit was down 9% to US$719mln versus US$791mln in the corresponding period of last year.
Facebook, a perennial distraction in the workplace, was not the main attraction for traders.
Wednesday’s main stimulus came from the Federal Reserve and Janet Yellen as interest rates will kept on hold, though many experts now believe a rise in September is more likely.
Basically, it was a case of no news being good news.
“Yesterday’s FOMC statement did exactly what many expected and offered little new insight into the Fed’s interest rate intentions, instead putting all of the emphasis on economic data between now and the next meeting in September,” said Craig Erlam, analyst at forex firm OANDA.
In Asia, key bourses were also positive. Japan’s Nikkei gained more than 1% to 20,520. Hong Kong’s Hang Seng edged 0.2% higher, while the Shanghai composite moved up 0.7%. India’s Sensex added 0.85%, and Australia’s ASX 200 gained a similar margin.
London’s FTSE 100 open is seen slightly higher, with IG Markets calling the benchmark at 6,636 to 6,641.