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(Alliance News) - European equities were on weaker footing in early dealings on Tuesday, amid fears of a further deterioration of US-China relations, as House Speaker Nancy Pelosi makes a provocative trip to Taiwan.
Beijing, which views Taiwan as its territory, has reacted furiously to the idea, warning US President Joe Biden that his administration was playing "with fire" and announcing a series of live-fire military drills in the Taiwan Straits.
The cautious mood boosted the dollar against the euro and pound, though it lost ground against similarly safe-haven yen.
The FTSE 100 was down 0.50 points, or 0.1%, at 7,409.72 early Tuesday. The FTSE 250 index was down 164.56 points, or 0.8%, at 19,914.67. The AIM All-Share index was down 6.29 points, or 0.7%, at 912.34.
The Cboe UK 100 index was down 0.3% at 739.24. The Cboe 250 was down 0.9% at 17,370.57. The Cboe Small Companies was down 0.1% at 13,915.51.
In Paris, the CAC 40 stock index was down 0.4%, while in Frankfurt, the DAX 40 was 0.6% lower.
Media reports have said that Pelosi, currently on an official Asia tour, will stop off in Taiwan and meet President Tsai Ing-wen on Wednesday. If so, she will be the highest-level US visit to Taipei in decades.
China need not turn any visit by Pelosi into a "crisis", White House National Security Council spokesman John Kirby told reporters, even as he warned that Beijing may be "positioning" itself for a show of military strength around the island.
Analysts at Dutch bank ING commented: "The dollar, the yen (which may break below 130.00 already today) and [the Swiss franc] should be the main beneficiaries.
"It is hard to predict how this new geopolitical thread will develop, and for now we simply highlight that this may be the trigger for an upside correction in the dollar today or in the coming days."
The pound faded to USD1.2201 early Tuesday from USD1.2270 at the London equities close on Monday. The euro fell to USD1.0226 from USD1.0270. Versus the yen, the greenback fell to JPY130.83 from JPY131.85. The buck recovered from JPY130.43 earlier on Tuesday, roughly a two-month low.
Analysts at Deutsche Bank commented: "Given the apparent uncertainty about the direction of the Fed in markets, many will be awaiting Fed's [James] Bullard, [Loretta] Mester and [Charles] Evans, who will speak throughout the day."
Though the Federal Reserve on Wednesday last week voted for its second straight 75-basis-point hike, investors interpreted subsequent comments from Chair Jerome Powell as dovish.
Powell said the Fed would not hesitate to implement a stronger rise if needed, but he also hinted that the pace of rate hikes could slow.
Bullard is among the Fed's more hawkish policymakers.
In London, BP shares rose 4.3%.
The oil major's second quarter profit jumped on stronger refining margins, though a Russia hit from earlier in the year more than ensured a weaker first-half bottom line.
By its preferred metric, BP's replacement cost more than trebled to USD7.65 billion in the second quarter of 2022, from USD2.38 billion a year earlier. On an underlying basis, RC profit was USD8.45 billion, up from USD2.80 billion. Pretax profit surged to USD14.06 billion from USD5.14 billion.
Total second-quarter revenue improved 85% to USD69.51 billion from USD37.60 billion.
BP swung to a first half loss, however. It posted a replacement cost loss of USD15.40 billion, swinging from a profit of USD5.71 billion a year earlier.
Profit was wiped out by a first quarter USD24.4 billion post-tax charge related to BP's exit from its near 20% stake in Russian business Rosneft, following the invasion of Ukraine.
BP lifted its quarterly dividend by 10% to 6.006 cents per share from 5.460 cents a year prior. The first-half payout is up 7.1% to 11.466 cents.
It executed USD2.3 billion worth of buybacks in the second quarter before completing the remainder of a USD2.5 billion programme in late July.
What's more, BP plans to complete a USD3.5 billion buyback before announcing third-quarter results, which are scheduled for November 1.
"On average, based on BP's current forecasts, at around USD60 per barrel Brent and subject to the board's discretion each quarter, BP continues to expect to be able to deliver share buybacks of around USD4.0 billion per annum and have capacity for an annual increase in the dividend per ordinary share of around 4% through 2025," it said.
Brent traded at USD99.43 a barrel early Tuesday, down from USD100.70 late Monday.
Biffa added 5.5% as the waste management firm reported record profit and reinstated its dividend after an "eventful" year.
Adjusted operating profit surged to a record high of GBP96.6 million in the year to March 25, from GBP44.2 million the year prior.
Biffa's pretax loss narrowed to GBP28.6 million from GBP52.8 million. The statutory profit measures includes a GBP104 million hit from adjusting items, up from GBP82 million a year earlier.
One-off items this year included a GBP25 million impairment from its Company Shop buy and a GBP17 million provision for a probe related to UK landfill tax laws. Landfill tax is a levy imposed on a firm that disposes of materials in waste sites.
Biffa's revenue surged 39% to GBP1.44 billion from GBP1.04 billion.
In addition, a 'put or shut up' deadline for suitor Energy Capital Partners was extended to the close of play on August 30.
Back in June, Biffa said it has received a series of "unsolicited and indicative" proposals from private equity firm ECP, an investor in the fields of energy transition, renewables and infrastructure.
The tilt valued Biffa at GBP1.36 billion.
Travis Perkins fell 8.6% as it posted a fall in half-year profit. Pretax profit in the six months to June 30 declined 6.2% to GBP136.6 million from GBP145.7 million.
Revenue increased 10% to GBP2.53 billion from GBP2.30 billion.
Its Toolstation arm, a seller of tools and building materials, suffered a sales fall. Toolstation revenue declined 4.6% amid "reduced DIY sales post-pandemic".
Greggs rose 2.3%. The bakery chain left its outlook unchanged as it reported a first-half revenue climb. Profit was largely flat, however, amid cost inflation.
In the half-year ended July 2, revenue increased 27% to GBP694.5 million from GBP546.2 million. Pretax profit inched up just 0.5% to GBP55.8 million from GBP55.5 million.
Distribution and selling costs ratcheted up 32% to GBP339.3 million from GBP257.8 million, as cost inflation dragged the Greggs bottom line.
"Greggs delivered an encouraging performance in the first half of the year with sales ahead of 2019 levels. These results demonstrate the continued strength of the Greggs brand and demand for our great tasting, quality and value for money offering," Chief Executive Roisin Currie commented.
"During the period we continued to make good progress with our strategic priorities, including expanding our shop estate and making Greggs more accessible to customers through extended trading hours and digital channels."
The firm noted that in the four weeks to July 30, like-for-like sales in company-managed shops were 13% higher annually.
"Clearly there are considerable uncertainties in the economy as a whole, but we continue to trade in line with our plan and are making good progress against our strategic objective to become a larger, multi-channel business. As such, the board's expectations for the full-year outcome remain unchanged," Greggs said.
In its 2021 annual results back in March, Greggs said it didn't expect "material profit progression" in 2022.
Greggs has appointed former Halfords and Pets at Home CEO Matthew Davies as its new chair. He also led Tesco's UK & Ireland arm.
He will take on the post on November 1.
Elsewhere in London, Revolution Beauty slumped 56%, the worst AIM performer.
The beauty and personal care products maker and retailer warned it has been hurt by cost inflation, supply chain issues and the war in Ukraine.
It expects only "low single digit revenue growth" in the first half ending August 31 and a "small" loss before interest, tax, depreciation and amortisation. Revenue a year earlier amounted to GBP78.6 million and it had reported an adjusted Ebitda of GBP5.1 million.
Gold rose to USD1,771.72 an ounce early Tuesday from USD1,766.01 late Monday.
By Eric Cunha; ericcunha@alliancenews.com
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