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(Alliance News) - Stocks in London were mixed at midday on Thursday following Wednesday's sell-off as investors look ahead to the European Central Bank's interest rate decision in the early afternoon and slew of US tech earnings after the New York market close.
Global stocks plunged Wednesday on rising worries about coronavirus lockdowns as France and Germany announced tough new restrictions and US cases continued to climb.
French President Emmanuel Macron announced that bars, restaurants and non-essential businesses will be forced to close for at least a month, a decision that came only hours after German Chancellor Angela Merkel announced similar measures in Europe's largest economy.
In London on Thursday, the FTSE 100 index was down 4.56 points, or 0.1%, at 5,578.27 at midday. The blue-chip index had closed down 146.19 points, or 2.6%, at 5,582.80 Wednesday - its lowest level in six months.
The FTSE 250 index was up 44.96 points, or 0.3%, at 17,293.88 at midday Thursday. The AIM All-Share was up 0.2% at 950.49.
The Cboe UK 100 index was up 0.2% at 554.08 points. The Cboe 250 was up 0.3% at 14,555.56. The Cboe Small Companies was down 0.2% at 9,455.09.
In Paris the CAC 40 index was down 0.4%, while the DAX 30 in Frankfurt was down 0.2%.
"Investors have witnessed a tremendous reset in equities over the past few days, which for some is a harbinger of another sell-off like February and March (the rise in virus cases and the return of lockdowns providing support for this idea) but for others, particularly in the US, is merely a wave of pre-election jitters that might help set up equities for a bounce after the election, assuming that event goes smoothly," said IG Group's Chris Beauchamp.
"With a few days left until the election however, there are unlikely to be many bargain hunters out shopping this side of the weekend, which sets up the potential for another flush in stocks to provide just the right kind of market turmoil as a backdrop to this hotly-contested presidential election," Beauchamp added.
In the FTSE 100, Lloyds Banking Group was up 4.5% after the UK lender reported a sharp rise in profit in the third quarter, as it did not have any payment protection insurance claims to cover.
In the three months to September 30, Lloyds' pretax profit surged to GBP1.04 billion from just GBP50 million a year before. Lloyds noted it put aside GBP1.80 billion in the third quarter last year to cover a sharp rise in payment protection insurance claims - which was not repeated in the third quarter of 2020 as the deadline for claims has passed.
Lloyds said its mortgage activity is "picking up strongly" and its increase in retail current accounts is ahead of the market. Lloyds said the strength of its mortgage business will offset the yield curve pressure the bank is facing from lower interest rates.
BT Group was up 3.8% after the telecommunications company said it delivered interim results in-line with expectations and raised earnings guidance.
For the half-year ended September 30, revenue fell 8% to GBP1.60 billion, from GBP11.46 billion last year and pretax profit declined 20% to GBP1.06 billion from GBP1.33 billion.
BT decided against paying an interim dividend, having paid out 4.62 pence last year, but plans to reinstate dividends in the 2021-22 financial year..
The former state monopoly said it was firmly on track with its modernisation programme and delivered GBP352 million in cost savings during the first half of the year.
BT raised its earnings before interest tax, depreciation, and amortisation outlook range for this year to GBP7.3 billion of its new revised range of between GBP7.3 billion to GBP7.5 billion. In addition, the company sees EBITDA of GBP7.9 billion for financial 2023.
BT also said it was boosted by a strong expansion of fibre to the premises orders through its Openreach digital network business, noting a "strong increase" in the second quarter.
"The key part of BT's half-year report is, ironically, not how it has performed over the past six months, but how it views near-term conditions. And it's here that shareholders have some cause for optimism. The group is forecasting GBP7.9 billion EBITDA by 2022-23, which would return it to pre-Covid levels within two to three years, and the reinstatement of its dividend next year," commented eToro analyst Adam Vettese.
Royal Dutch Shell 'A' and 'B' shares were up 2.9% and 2.8% respectively after the oil major announced a new cash allocation framework which it said will enable the oil company to reduce debt, increase distributions to shareholders, and allow for disciplined growth.
The energy firm is London's largest company by market capitalisation.
Shell said the cash allocation framework includes a target to reduce net debt to USD65 billion from USD73.5 billion as of September 30. Upon achieving this milestone, Shell targets to distribute a total of 20% to 30% of cash flow from operations to shareholders.
Increased shareholder distributions will be achieved through a combination of Shell's progressive dividend and share buybacks. Remaining cash will be allocated to "disciplined and measured" capital expenditure growth and further debt reduction, it added.
The Anglo-Dutch firm declared a third-quarter dividend of 16.65 US cents, down 65% from USD0.47 paid out in the third quarter last year. However, it was up 4.0% from the 16.00 cents paid for the second quarter, and Shell confirmed on Thursday it will grow the dividend annually as part of its progressive dividend policy.
For the third quarter ended September 30, Shell reported attributable income of USD489 million, down 92% from USD5.88 billion in the third quarter last year. Current cost of supply earnings for the period were USD177 million, down 97% from USD6.08 billion.
"The modest rise and an accompanying blueprint for future growth in the dividend is at least a gesture to shareholders that their need for income won't be completely forgotten as the company looks to continue its transition to a post fossil fuels future," noted AJ Bell's Russ Mould.
At the other end of the large caps, Rolls-Royce was the worst performer down 14%. The jet engine maker was suffering a negative read-across after European aircraft maker Airbus said the global air travel recovery has been slower than anticipated and swung to a net loss for the third quarter of 2020.
For the three months to September 30, Airbus recorded a net loss of EUR767 million compared with EUR989 million profit recorded a year ago. Revenue for the quarter dived 27% to EUR11.21 billion from EUR15.30 billion.
The sharp fall in revenue was attributed to a difficult market environment in commercial aircraft due to Covid-19, with around 40% fewer deliveries year-on-year. A total of 341 commercial aircraft were delivered in the first nine months of 2020, down from 571 aircraft a year before.
Airbus shares were down 2.0% in Paris.
Standard Chartered was down 4.0% after the Asia-focused bank reported a sharp drop in third-quarter profit but believes its ongoing transformation will allow the bank to weather the pandemic in "good shape".
In the three months to September 30, StanChart recorded a pretax profit of USD435 million, down 61% year on year from USD1.11 billion. The lender booked a USD358 million credit impairment in the third quarter, up from USD280 million a year before, but noted it is down from the USD611 million credit charge taken in the second quarter.
Operating income dipped 11% to USD3.51 billion from USD3.96 billion, as net interest income declined 16% to USD1.62 billion from USD1.94 billion.
The pound was quoted at USD1.2944 Thursday at midday, down from USD1.2985 at the London equities close Wednesday.
The euro was priced at USD1.1712, down from USD1.1756, ahead of the European Central Bank's interest rate decision at 1245 GMT.
Analysts at ActivTrades commented: "The euro continues to weaken in relation to its peers during early Thursday trading as investors position themselves ahead of today's European Central Bank meeting. The coronavirus is once again dominating headlines with the second wave of the pandemic advancing across Europe, forcing Germany and France - the continent's two largest economies - to announce new national lockdowns.
"Taking into account the likely negative impact these winter lockdowns will have in an already weakened eurozone economy, many in the markets believe that later today the ECB will announce additional stimulus measures and increase the cautious emphasis of its forward guidance. Should such predictions materialise, we can expect further short term single currency weakness."
Against the yen, the dollar was trading a JPY104.37, flat on JPY104.34 late Wednesday in London.
Brent oil was quoted at USD37.78 a barrel Thursday midday, down sharply from USD39.12 late Wednesday. Gold was trading at USD1,878.21 an ounce, down from USD1,883.33.
US stock market futures were pointed higher after major indices posted their biggest declines since June on Wednesday.
The Dow Jones Industrial Average was called up 0.2%, the S&P 500 up 0.4% and the Nasdaq Composite up 0.8%. The Dow closed down 3.4% on Wedneday, S&P 500 down 3.5% and Nasdaq Composite down 3.7%.
Ahead in the US earnings calendar on Thursday, online marketplace Amazon, iPhone maker Apple, and social media platforms Facebook and Twitter all report earnings after the closing bell in New York.
The tech bonanza comes after Capitol Hill clashed with Silicon Valley on Wednesday over legal protections and censorship on social media during a fiery hearing a week before Election Day in which Twitter's Jack Dorsey acknowledged that platforms need to do more to "earn trust."
Dorsey - along with Facebook CEO Mark Zuckerberg and Google chief Sundar Pichai - had been summoned to the Senate to debate a law known as Section 230 that shields their platforms from liability over what their users post.
With the election looming, tech executives have been facing increased pressure to shield users from the rapid propagation of false information while staying above the political fray.
All three tech executives made a heightened attempt to stress their political impartiality in testimony delivered over video-conferencing software to committee lawmakers. Facebook, Google and Twitter explained that they had made great strides in enhancing their content-moderation practices so they can more efficiently and consistently identify harmful content across the internet.
Apple, Amazon, Twitter and Facebook were up 0.9%, 0.9%, 5.8% and 2.8% respectively in pre-market trade in New York.
"When it comes to social media platforms, it is all about digital ad revenue. Investors will like to see improvement in impression when it comes to companies like Facebook and Twitter as the advertising revenue is pretty much linked to this particular matrix. There are also higher expectations of a rebound in Google's advertisement revenue. As for Apple, investors are very much focused on the guidance, and Apple's iPhone 12 should have a positive impact," said AvaTrade analyst Naeem Aslam.
The economic events calendar on Thursday has US GDP readings at 1230 GMT and Germany inflation figures at 1300 GMT.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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