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(Alliance News) - Stock prices in London are seen opening flat on Tuesday after FTSE 100 index heavyweights HSBC Holdings and BP reported big first-quarter profit drops.
Meanwhile, food, clothing and homewares retailer Marks & Spencer said it does not expect to pay a dividend due to the coronavirus crisis.
IG futures indicate the FTSE 100 index will open 4.31 points higher at 5,851.10. The blue-chip index closed up 94.56 points, or 1.6%, at 5,846.79 Monday.
BP reported a sharp drop in first-quarter earnings as the oil and gas industry suffers from supply and demand shocks "on a scale never seen before", the oil company said.
Oil prices collapsed as a production war broke out between Saudi Arabia and Russia earlier this year, just as demand was being hit by the Covid-19 pandemic.
For the quarter ended March 31, underlying replacement cost profit - BP's preferred metric - was USD0.8 billion, down 67% from USD2.4 billion for the same period a year earlier.
The result, BP said, reflected lower prices, sharply lower demand in the Downstream unit particularly in March, a lower estimated result from Rosneft, and a lower contribution from oil trading.
BP holds a 19.75% stake in Russian oil firm Rosneft.
Additionally, BP swung to a replacement cost loss of USD0.6 billion from USD2.1 billion profit in the first quarter of 2019.
BP said it was dealing with an "exceptionally challenging environment" and "demand destruction".
Still, the oil major declared a first-quarter dividend of 10.5 US cents, up 2.4% from 10.25 cents in the fourth quarter and first quarter of 2019.
"At the same time, we are taking decisive actions to strengthen our finances - reinforcing liquidity, rapidly reducing spending and costs, driving our cash balance point lower. We are determined to perform with purpose and remain committed to delivering our net zero ambition," said Chief Executive Bernard Looney.
BP said it it aiming to drive its cash balance point below USD35 a barrel in 2021.
Brent oil was quoted at USD19.17 a barrel Tuesday morning, flat from USD19.22 late Monday.
Crude prices continue to be hurt as demand collapses and storage facilities fill up.
WTI, the US benchmark, plunged below USD11 a barrel early Tuesday, a day after it lost a quarter of its value, after a major exchange-traded fund started selling its short-term contracts of the commodity.
The US Oil Fund - a massive, oil-backed exchange-traded vehicle - said it would sell all its holdings in the June delivery and would buy into longer-dated contracts.
HSBC reported a sharp drop in first-quarter profit as the London-headquartered, Asia-focused bank upped its expected credit loss in the face of the Covid-19 pandemic.
The lender said it expects the global health crisis to hurt revenue in 2020 - due to lower customer activity - resulting in "materially" lower profit compared to 2019. For 2019, Europe's largest lender reported pretax profit of USD13.34 billion.
As a result, HSBC has been forced to up its expected credit loss by USD3.03 billion in the first quarter, from USD585 million a year before.
For the three months ended March, pretax profit dropped 48% to USD3.23 billion from USD6.21 billion a year prior. The figure missed the first-quarter company-compiled consensus estimate of USD3.66 billion.
HSBC shares were down 0.1% in Hong Kong. They have lost 30% of their value in London so far in 2020.
The Japanese Nikkei 225 index closed down 0.1%. However, in China, the Shanghai Composite is up 0.1%, while the Hang Seng index in Hong Kong is up 0.5%.
"Asia markets underwent a rather more mixed and cautious session as further declines in oil prices weighed on sentiment and this looks set to translate into a similarly cautious open here in Europe. While US markets appear to be much more exuberant, investors elsewhere appear to be adopting a much more cautious approach, when it comes to pushing up beyond their recent range highs," said CMC Markets analyst Michael Hewson.
Back in London, retailer Marks & Spencer said it has strengthened its liquidity position in light of the coronavirus crisis as trading is hurt by UK government lockdown measures.
"We are planning for the Clothing & Home business to be severely constrained during lockdown and highly uncertain trading conditions in a prolonged exit period. In the absence of a clear basis for forecasting, our scenario planning and stress tests are based on materially subdued trading for the balance of 2020 in Clothing & Home," the retailer said.
The high street stalwart said a formal agreement has been reached with the lending syndicate of banks providing the GBP1.1 billion revolving credit facility to substantially relax or remove covenant conditions for the tests arising in September 2020, March 2021 and September 2021.
Further, M&S confirmed it is eligible for the UK Government's Covid Corporate Financing Facility, which provides the firm with significant further liquidity headroom.
However, in light of the crisis, M&S said it does not anticipate paying a dividend for the financial year, generating a cash saving of GBP210 million.
The pound was quoted at USD1.2416 early Tuesday, soft from USD1.2421 at the London equities close Monday.
The euro was at USD1.0824, soft from USD1.0836. Against the yen, the dollar was quoted at JPY107.26, flat from JPY107.21.
Gold was trading at USD1,694.62 an ounce, down from USD1,712.14.
The economic calendar on Tuesday has Irish retail sales at 1100 BST and US consumer confidence at 1500 BST.
The latest market share grocery figures from Kantar Worldpanel are released at 0800 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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