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(Alliance News) - Stock prices in London are set to open higher Thursday amid a deluge of interim earnings reports, with European stocks getting a boost from a dovish US Federal Reserve.
Both Lloyds Banking Group and Royal Dutch Shell swung to half-year losses as they took chunky impairments.
IG says futures indicate the FTSE 100 index of large-caps to open 16.84 points higher at 6,148.30 on Thursday. The FTSE 100 index closed up just 2.20 points at 6,131.46 on Wednesday.
The Fed's dovish message last night helped Wall Street end higher, said Michael Hewson, chief market analyst at CMC Markets, "and this effect is likely to manifest itself into a similarly positive start for European stocks".
US Federal Reserve Chair Jerome Powell warned that the spiking number of new coronavirus cases in recent weeks was likely already starting to hinder the fragile economic recovery from the pandemic-induced recession.
"The path forward for the economy is extraordinarily uncertain," Powell told a press conference. US second-quarter GDP data, out on Thursday, would likely be the worst numbers posted in modern history, he noted.
Powell said there is "clearly a risk" that the virus resurgence is hurting economic growth and the labour market rebound, pointing to early data showing that the initially steady recovery in household spending was hitting headwinds.
At its latest meeting, the Fed kept its benchmark interest rate on hold at near-zero levels.
The bank said in its statement that it would increase its holdings of Treasury bills and mortgage-backed securities "at least at the current pace to sustain smooth market functioning".
The dollar dropped Wednesday evening as Powell sounded caution over the US economy's recovery path, but has since gained back ground.
Sterling was quoted at USD1.2955 early Thursday, lower than USD1.2968 at the London equities close on Wednesday. Sterling had surged just above the USD1.30 mark after the Fed decision.
The euro traded at USD1.1752 early Thursday, down on USD1.1767 late Wednesday. Against the yen, the dollar was quoted at JPY105.27, up versus JPY105.08.
In New York on Wednesday, Wall Street ended higher. The Dow Jones Industrial Average closed up 160.29 points, or 0.6%, at 26,539.57.
The S&P 500 closed up 40.00 points, or 1.2%, at 3,258.44 and the Nasdaq Composite ended up 140.85 points, or 1.4% at 10,542.94.
In UK company news, Royal Dutch Shell swung to a second-quarter loss as the oil major took a hefty USD16.8 billion impairment charge.
Adjusted earnings - previously referred to as CCS earnings attributable to shareholders excluding identified items - slumped to just USD638 million in the second quarter from USD3.46 billion a year ago.
Including the USD16.8 billion impairment charge - taken "as a result of revised medium- and long-term price and refining margin outlook assumptions in response to the Covid-19 pandemic and macroeconomic conditions as well as energy market demand and supply fundamentals" - Shell posted a loss attributable to shareholders of USD18.13 billion versus income of USD3.00 billion a year ago.
"Second quarter 2020 results reflected lower realised prices for oil, LNG and gas, lower realised refining margins, Oil Products sales volumes and higher well write-offs, compared with the second quarter 2019. This was partly offset by very strong crude and oil products trading and optimisation results as well as lower operating expenses," said Shell.
Lloyds Banking reported a pretax loss of GBP602 million for the half-year to June 30, swinging from a profit of GBP2.90 billion a year ago.
Net income was down 16% to GBP7.41 billion, with net interest income down 11%.
The lender took a GBP3.82 billion impairment in the half - including GBP2.4 billion in the second quarter - up from GBP579 a year ago, and said it expects its impairments for the full-year to be between GBP4.5 billion to GBP5.5 billion.
The impairments taken in the half reflected "a significant deterioration in forward looking economic outlook."
Looking to the remainder of the year, Lloyds said: "There have been early signs of recovery in the group's core markets, mainly in consumer spending and the housing market, but the outlook remains highly uncertain and the impact of lower rates and economic fragility will continue for at least the rest of the year."
AstraZeneca reported a 12% rise in total revenue in the first half of the year to USD12.63 billion, while core earnings per share rose 24% to USD2.01. The pharmaceutical firm said its 2020 full-year guidance was unchanged at high single-digit to low double-digit percentage growth in revenue and mid- to high-teens growth in core EPS.
Astra held its first interim dividend steady at USD0.90 per share.
It promised a "broad and equitable" supply of any Covid-19 vaccine that it develops during the pandemic at no profit.
Contract caterer Compass reported a 44% slump in organic revenue for the third quarter, bringing its year-to-date slide to 14%.
The third quarter decline was led by Europe, down 54%. North America was down 45% and Rest of World down 20%.
The group's operating margin for the quarter was minus 6.3%.
"The pace at which our volumes will recover is still unclear, especially given a possible increase in local lockdowns. We are encouraged by the relative improvement in performance in June, as well as the early signs of an acceleration in first time outsourcing opportunities. In the meantime, we continue to work with our clients to help them reopen safely. We are proactively managing the business, reducing our costs, rebuilding our margins and investing to strengthen our competitive advantages," said Compass.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.3%. In China, the Shanghai Composite is flat, while the Hang Seng index in Hong Kong is down 0.1%. Â
Gold was quoted at USD1,959.59 an ounce early Thursday, higher than USD1,955.22 on Wednesday. Brent oil was trading at USD43.64 a barrel early Thursday, up on USD43.42 late Wednesday.
The economic events calendar on Thursday has Germany GDP readings at 0900 BST, eurozone unemployment at 1000 BST and US GDP and jobless claims figures at 1330 BST.
Commenting on the US data releases on Wednesday, Jeffrey Halley, senior market analyst at Asia Pacific, said: "Arguably, the weekly jobless data is more important, with markets somewhat anxious that both initial and continuing claims will spike as Covid-19 engulfs the US sunbelt states. Initial Jobless Claims should edge higher by 1.45 million, with Continuing Claims stubbornly remaining above 16 million. The recovery in both numbers has stalled in recent weeks, hinting that the recovery is stalling."
By Lucy Heming; lucyheming@alliancenews.com
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