LONDON (Alliance News) - London stock indices are posting broad gains mid-morning Thursday amid a whirlwind of corporate news which sees Royal Dutch Shell lead the gainers in the FTSE 100 and Babcock International Group fall to the bottom.
The FTSE 100 trades up 0.4% at 6,656.92, the FTSE 250 trades up 0.2% at 17,555.19, and the AIM All-Share is up 0.1% at 749.82.
In mainland Europe, the French CAC 40 is up 0.2% and the German DAX 30 is also up 0.2%, despite German unemployment showing an unexpected rise in July. The number of unemployed rose 9,000 in July from June, against expectations for a decline of 5,000. The jobless rate remained unchanged at a seasonally adjusted 6.4% in July. The rate came in line with expectations.
Royal Dutch Shell shares are trading higher, with 'B' shares up 3.6% and 'A' shares up 3.3%. The oil and gas giant reported a USD1.7 billion drop in earnings in the second quarter of 2015, as its upstream division continued to be hampered by lower oil prices, compounded by a fall in production.
The company reaffirmed its commitment to its dividend, alongside a share buyback, as its merger with BG Group continues as planned. BG shares are up 3.3%. Shell also confirmed it sold a 33.24% stake in Japanese refiner Showa Shell Sekiyu KK for around USD1.40 billion to Idemitsu.
Shell reported current cost of supply earnings of USD3.4 billion in the second quarter of 2015, down from USD5.1 billion a year before, as revenue fell to USD73.95 billion from USD115.27 billion after being hit by lower oil prices.
Earnings before exceptional items came in at USD3.8 billion in the second quarter, down from USD6.1 billion a year before, whilst pretax profit followed suit and fell to USD5.57 billion from USD9.12 billion. Those exceptional items totalled USD474 million in the quarter, down from USD979 million a year earlier. The items comprised of USD263 million to its upstream division and USD215 million to downstream operations.
Babcock International trades down 3.8%. The support services company said it is trading in line with its first-half and full-year expectations so far in its 2015 financial year. But Babcock said it still expects a fall in first-half revenue in its defence and security business and said it expects oil and gas-related revenue in its MCS business to drop, though emergency services revenue should offset this.
BT Group is down 2.5% even though it posted a rise in pretax profit for its first quarter and said it is on track to achieve its outlook. For the quarter to end-June, BT posted a pretax profit of GBP632 million, up from GBP546 million, as revenue was flat at GBP4.36 billion, compared to GBP4.35 billion.
On an adjusted basis, stripping out interest expenses on pensions and acquisition costs, amongst other items, pretax profit was GBP694 million, up from GBP638 million, on revenue of GBP4.28 billion. According to broker expectations provided by the company, analysts expected BT to post a pretax profit of GBP683 million, on revenue of GBP2.29 billion.
BT's key measure, underlying revenue excluding transit, was flat compared to a 1.3% decline last quarter, it said. It saw continued growth in its BT Consumer arm, seeing broadband and television revenue up 7%. Openreach revenue was flat as a strong performance in fibre was offset by a hit from regulatory price changes.
AstraZeneca, up 2.2%, improved its revenue guidance for its full year at constant currency, as it posted a lower pretax profit for its first half due to higher research and development costs.
The FTSE 100-listed pharmaceutical giant has improved its revenue guidance for its full year at constant currency, now expecting revenue to decline by low single-digit percentage - it had previously guided at the mid single-digit. Its expectations for core earnings per share is unchanged, it continues to expect it to increase by low single-digit percent in the full year.
Based on current exchange rates, revenue is expected to decline by high single-digit percent.
In the FTSE 20, HellermannTyton Group shares are surging after the company said it has agreed to be taken over by Delphi Automotive, the UK-based automotive parts manufacturer. HellermannTyton, which makes wires and cables, said it has agreed to be acquired by Delphi for 480 pence per share, valuing the company at around GBP1.07 billion.
The price is at at 45% premium to HellermannTyton's closing price on Wednesday and at a 43% premium to its one-month volume weighted average price prior to the offer. The company currently trades up 42% at 471.50 pence.
Laird reiterated its expectations for the full year and posted a rise in pretax profit for its first half, as revenue was boosted by more favourable exchange rates and a full contribution from its acquisition of Model Solution last year.
The FTSE 250-listed technology company posted a pretax profit of GBP21.6 million for the half year to end-June, up from GBP16.0 million a year before, as revenue rose to GBP305.9 million from GBP252.6 million.
In sterling terms, revenue rose 21%, helped by a more favourable exchange rate for the US dollar relative to sterling. In dollar terms, revenue rose 11%. The company's shares trade up 10%.
Investors also are digesting the US Federal Reserve's monetary policy statement released on Wednesday evening. The Federal Reserve noted the strengthening US economy while leaving its benchmark interest rate unchanged, setting the stage for a possible tightening of monetary policy in late 2015.
"The labour market continued to improve with solid job gains and declining unemployment," the US central bank said after a two-day meeting of its monetary policy committee.
Fed Chair Janet Yellen and other board members in recent months have publicly stated their expectations for a rate hike before the end of the year if the economy continues to show improvements and currently low inflation rises to a more normal level approaching 2%. Most Wall Street economists expect the Fed to begin tightening monetary policy at one of its next meetings - on September 17 or October 28.
The Fed said it "anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labour market and is reasonably confident that inflation will move back to its 2% objective over the medium term," repeating its past statements nearly word-for-word.
The central bank's emphasis on continuing job improvement will make the next US nonfarm payrolls number, which is due next week, even more important than usual.
"The latest FOMC statement was a teeny-weeny bit more hawkish than its predecessor, as long as you consider the reference to 'some more tightening' in the labour market being a pre-requisite for lift-off, than 'more tightening'. On such small details hangs market sentiment, but we can conclude firstly that the first hike is getting closer, secondly that when it happens still depends on how data evolve," says Kit Juckes, strategist at Societe Generale.
Still ahead in the economic calendar are German inflation data at 1300 BST followed by US second quarter GDP at 1330 BST.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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