(Alliance News) - A dovish tone from the US Federal Reserve was unable to lift the FTSE 100 index in early dealings in London on Thursday amid a deluge of earnings reports, with Lloyds Banking the worst blue-chip performer after swinging to an interim loss.
Focus now turns to second-quarter GDP readings due from Germany and the US later in the day.
The FTSE 100 index was down 50.23 points, or 0.8%, at 6,081.23 early Thursday. The mid-cap FTSE 250 index was down 92.49 points, or 0.5%, at 17,155.17 and the AIM All-Share index was down 0.4% at 892.40.
The Cboe UK 100 index was down 0.9% at 606.05. The Cboe 250 was down 0.5% at 14,567.35 and the Cboe Small Companies flat at 9,134.15.
In mainland Europe, the CAC 40 in Paris was down 0.5% while the DAX 30 in Frankfurt was down 1.1% early Thursday.
Stocks ended higher in the US in the wake of the Fed's cautious tone, but trade in Asia overnight was more downbeat.
In Asia on Thursday, the Japanese Nikkei 225 index closed down 0.3%. In China, the Shanghai Composite ended down 0.2% while the Hang Seng index in Hong Kong is down 0.7%.
Fed Chair Jerome Powell warned that the spiking number of new coronavirus cases in recent weeks was likely already starting to hinder the fragile economic recovery from the pandemic-induced recession.
"The path forward for the economy is extraordinarily uncertain," Powell told a press conference. US second-quarter GDP data, out on Thursday, would likely be the worst numbers posted in modern history, he noted.
Powell said there is "clearly a risk" that the virus resurgence is hurting economic growth and the labour market rebound, pointing to early data showing that the initially steady recovery in household spending was hitting headwinds.
At its latest meeting, the Fed kept its benchmark interest rate on hold at near-zero levels.
The bank said in its statement that it would increase its holdings of Treasury bills and mortgage-backed securities "at least at the current pace to sustain smooth market functioning".
The dollar dropped Wednesday evening after the Fed's update, but has since gained back some ground.
Sterling was quoted at USD1.2959 early Thursday, lower than USD1.2968 at the London equities close on Wednesday. Sterling had surged just above the USD1.30 mark after the Fed decision.
The euro traded at USD1.1754 early Thursday, down on USD1.1767 late Wednesday. Against the yen, the dollar was quoted at JPY105.07, flat versus JPY105.08.
Gold was quoted at USD1,949.89 an ounce early Thursday, lower than USD1,955.22 on Wednesday. Brent oil was trading at USD43.36 a barrel early Thursday, soft on USD43.42 late Wednesday.
At the bottom of the FTSE 100 was Lloyds Banking Group, tumbling 7.1%. The lender reported a pretax loss of GBP602 million for the half-year to June 30, swinging from a profit of GBP2.90 billion a year ago.
Net income was down 16% to GBP7.41 billion, with net interest income down 11%.
The bank took a GBP3.82 billion impairment in the half - including GBP2.4 billion in the second quarter - up from GBP579 a year ago, and said it expects its impairments for the full-year to be between GBP4.5 billion to GBP5.5 billion.
The impairments taken in the half reflected "a significant deterioration in forward looking economic outlook".
Looking to the remainder of the year, Lloyds said: "There have been early signs of recovery in the group's core markets, mainly in consumer spending and the housing market, but the outlook remains highly uncertain and the impact of lower rates and economic fragility will continue for at least the rest of the year."
Compass shares shed 2.0% after the contract caterer reporting a 44% slump in organic revenue for the third quarter, bringing its year-to-date slide to 14%.
The third-quarter decline was led by Europe, down 54%. North America was down 45% and Rest of World down 20%.
Compass's operating margin for the quarter was minus 6.3%.
"The pace at which our volumes will recover is still unclear, especially given a possible increase in local lockdowns. We are encouraged by the relative improvement in performance in June, as well as the early signs of an acceleration in first time outsourcing opportunities. In the meantime, we continue to work with our clients to help them reopen safely. We are proactively managing the business, reducing our costs, rebuilding our margins and investing to strengthen our competitive advantages," said Compass.
Shares in Royal Dutch Shell were little moved, with 'A' shares down 0.3% and 'B' shares down 0.4%, despite the oil major reporting a sizeable second quarter impairment.
Adjusted earnings - previously referred to as CCS earnings attributable to shareholders excluding identified items - slumped to just USD638 million in the second quarter from USD3.46 billion a year ago.
Including a USD16.8 billion impairment charge - taken "as a result of revised medium- and long-term price and refining margin outlook assumptions in response to the Covid-19 pandemic and macroeconomic conditions as well as energy market demand and supply fundamentals" - Shell posted a loss attributable to shareholders of USD18.13 billion versus income of USD3.00 billion a year ago.
AstraZeneca shares rose 2.3%. The pharmaceutical firm reported a 12% rise in total revenue in the first half of the year to USD12.63 billion, while core earnings per share rose 24% to USD2.01.
The FTSE 100 constituent said its 2020 full-year guidance was unchanged at high single-digit to low double-digit percentage growth in revenue and mid- to high-teens growth in core EPS.
Astra held its first interim dividend steady at USD0.90 per share.
The economic events calendar on Thursday has Germany GDP readings at 0900 BST, eurozone unemployment at 1000 BST and US GDP and jobless claims figures at 1330 BST.
The US GDP figure due later will be "ugly", said Lloyds Banking.
"While the forecast fall is very large, activity rebounded in late May and through June. The focus now is on whether growth is faltering in July. For that reason, today's weekly jobless claims will also draw considerable attention," said Lloyds.
By Lucy Heming; lucyheming@alliancenews.com
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