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(Alliance News) - Stocks in London were mixed at midday in London on Tuesday on a busy day on the UK earnings front, with headlines dominated by FTSE 100 heavyweights BP and Diageo.
The UK flagship FTSE 100 index was flat at 6,031.83. The mid-cap FTSE 250 index was up 45.10 points, or 0.3%, at 17,203.71. The AIM All-Share index was down 0.1% at 891.78.
The Cboe UK 100 index was flat at 601.19. The Cboe 250 was up 0.4% at 14,589.68 and the Cboe Small Companies was up 0.2% at 9,108.65.
In mainland Europe, the CAC 40 in Paris was up 0.1%, while the DAX 30 in Frankfurt was down 0.4%.
"UK stocks are flat today, despite an overwhelmingly positive session throughout Asia. While the PMI data released yesterday has helped boost sentiment around the July recovery, we are seeing ongoing fears of a less fiscally accommodative environment hamper that optimism. With major differences in opinion over exactly what any fiscal accommodation should look like, the ultimate decision from Congress will be a major determinant of market sentiment as we move forward. With the fear of a potential slump in economic activity that would come in the event of a fiscal withdrawal, the weakness we are seeing in the dollar this morning should come as no surprise," said IG Group's Josh Mahony.
The pound was quoted at USD1.3061 at midday on Tuesday, firm from USD1.3041 at the London equities close Monday. The euro was quoted at USD1.1785, up from USD1.1737. Against the yen, the dollar was trading at JPY105.98, down from JPY106.19.
On the London Stock Exchange, BP was the best blue-chip performer, up 7.1%, despite the UK oil major cutting its dividend for the first time since the Deepwater Horizon disaster in 2010, as it swung to a huge loss amid lower oil prices.
Brent oil was quoted at USD43.43 a barrel on Tuesday at midday in London, lower than USD44.11 late on Monday. The North Sea benchmark was trading at around USD66 a barrel at the start of 2020.
The energy company halved its second-quarter dividend to 5.25 US cents from 10.5 cents the previous quarter.
"The dividend cut was perhaps the worst kept secret in the market - there was some surprise BP hadn't acted sooner but nearly everyone expected a cut alongside these second-quarter numbers. The loss BP announced this morning, linked to the writedown of the valuation of its assets, was no worse than analysts had expected, likely prompting a measure of relief," explained AJ Bell's Russ Mould.
For the half-year ended June 30, BP swung to a replacement cost loss of USD18.29 billion from a profit of USD3.78 billion a year before. It reported an underlying replacement cost loss of USD5.89 billion from a profit of USD5.17 billion. The underlying RC measure is what BP characterises as net income.
In the three months to June 30, underlying replacement cost losses were at USD6.7 billion from a profit of USD2.8 billion in the same period last year. Consensus estimates were for a loss in the region of around USD8.45 billion.
The loss for the second quarter attributable to BP shareholders was USD16.8 billion. The losses were largely due to BP writing down the value of its assets after it cut its oil price forecasts.
BP's market capitalisation is around GBP61 billion, the eighth largest in the FTSE 100.
BT was up 6.5% after Berenberg raised the former state telephone monopoly to Buy from Hold.
Melrose Industries was up 5.5% after the industrial turnaround specialist said it has agreed improved financial covenants with its lenders out to December 21, 2022.
Melrose said the covenant amendments include a waiver of the test of net debt-to-earnings before interest, tax, depreciation and amortisation to the end of 2021.
As such, the London-based firm said it now has the financial flexibility it needs to continue to focus on cash generation and adapt to current market conditions.
At the other end of the large-cap index, Diageo was the worst performer, down 6.1% as the distiller's sales were hit hard by the closure of bars and restaurants due to the coronavirus pandemic.
For the financial year ended June 30, Diageo reported an 8.3% drop in sales to GBP17.70 billion from GBP19.29 billion in financial 2019, and net sales of GBP11.75 billion, down from GBP12.87 billion. Pretax profit fell 52% to GBP2.04 billion from GBP4.24 billion.
Diageo said organic net sales were down 8.4%, with growth in North America more than offset by declines in all other regions. According to company-compiled consensus for financial 2020, it was expected to post a fall in organic net sales of 7.3%. Organic volumes were down 11%.
Organic operating profit was down 14.4%, hurt by volume declines, cost inflation and unabsorbed fixed costs. Consensus had expected organic operating profit to fall 13.6%.
Looking ahead, the Guinness brewer said that, due to the continued uncertainty caused by the ongoing Covid-19 pandemic, it is still not able to provide specific financial guidance.
Diageo's market cap stands at around GBP63.74 billion, the fifth largest on the FTSE 100.
"Like the other major brewers Diageo has large fixed costs that can't be flexed when sales fall, so small falls in revenue hit profits hard. However, a strong showing in North America, especially from ready to drink Smirnoff products in stores, went some way to alleviating the damage," commented Hargreaves Lansdown analyst William Ryder.
Gold was priced at USD1,974.00 an ounce Tuesday midday, firm from USD1,971.10 late Monday.
US stock market futures were pointed to a lower open after a positive close in New York on Monday. This saw the Nasdaq Composite index end at a fresh record high as investors keep gravitating towards tech stocks.
The DJIA was called down 0.2%, the S&P 500 index down 0.3% and the Nasdaq Composite down 0.5%.
Microsoft shares will be in focus after US President Donald Trump said he would approve of Microsoft or another major US company buying the social media app TikTok. They were down 0.7% in pre-market activity in New York on Tuesday, having closed up 5.6% on Monday.
Trump gave TikTok six weeks to sell its US operations to an American company, saying Monday it would be "out of business" otherwise, and that the government wanted a financial benefit from the deal.
"It's got to be an American company...it's got to be owned here," Trump said. "We don't want to have any problem with security."
In response, China accused the US of "bullying" over the popular video app.
Elsewhere, attention will turn to Washington, where Democrats and Republicans are battling to hammer out a new economic stimulus package.
Democrat House Speaker Nancy Pelosi said a meeting with Treasury Secretary Steven Mnuchin and White House chief of Staff Mark Meadows had been "productive".
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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