(Alliance News) - Investors cheered the prospect of increased shareholder returns from Royal Dutch Shell, with share price gains for the oil major helping to boost London's blue-chip FTSE 100 index in opening dealings.
The FTSE 100 index was up 42.53, or 0.6%, at 7,143.41 early Wednesday. The mid-cap FTSE 250 index was up 99.86 points, or 0.4%, at 22,995.22. The AIM All-Share index was down 0.1% at 1,263.49.
The Cboe UK 100 index was up 0.7% at 711.01. The Cboe 250 was up 0.5% at 20,701.48, and the Cboe Small Companies flat at 15,544.82.
In mainland Europe, the CAC 40 in Paris was up 0.5%, while the DAX 30 in Frankfurt was 0.8% higher early Wednesday.
Europe rallied ahead of Wednesday's headline event, the release of minutes from the most recent FOMC meeting at 1900 BST.
"As there really is not much thrilling news on the dollar currently the market will thoroughly scrutinise the Fed minutes of its June meeting due for publication tonight to find out what the FOMC's approach to tapering and rate hikes might be after the dot plots – ie the FOMC members' view on future key rates – moved clearly towards an earlier rise of the key rate," said Commerzbank.
Ahead of the Fed meeting minutes, the dollar edged up. Sterling was quoted at USD1.3794 early Wednesday, flat on USD1.3798 at the London equities close on Tuesday. Against the yen, the dollar trading at JPY110.67, up from JPY110.57.
After some data showed German industrial production unexpectedly declined for a second straight month in May, the euro traded at USD1.1815 on Wednesday morning, down against USD1.1829 late Tuesday. However, Frankfurt's DAX index managed to shake-off the numbers.
German production in industry fell 0.3% on a monthly basis in May, following a revised 0.3% fall in April. Output had been expected to grow 0.5% in May, according to FXStreet. Markets had expected growth of 0.7% for April's reading.
Year-on-year, May's jump was 17% - another disappointment, with markets having eyed an acceleration to 35% growth after a 28% jump in April.
The data comes a day after it was revealed that German new manufacturing orders fell month-to-month in May, in a surprise that massively missed market expectations.
ING on Wednesday noted the weak recent data, but said: "Even with two disappointments in a row, we aren't giving up on our view that the industrial outlook remains bright. Production expectations came somewhat off record highs in the last two months but with filled orders books and reduced inventories, industrial production should remain an important growth driver this year."
In London, Shell was driving the FTSE 100 higher. Shell 'A' shares rose 3.1% and 'B' shares rallied 3.2% after the energy firm unveiled plans to lift shareholder distributions and said it will retire its USD65 billion net debt target.
The oil major set out plans to "move to the next phase of its capital allocation framework" and increase total shareholder distributions to within the range of 20% to 30% of cash flow from operations. This will start with its second-quarter results announcement, on July 29. In the first quarter, Shell's cash flow from operations was USD8.29 billion, up 32% quarter-on-quarter.
Shell credited the planned increase in returns to a strong operational and financial delivery, combined with an improved macro-economic outlook.
Shares in peer BP moved 2.0% higher.
Also boosting London's oil stocks were Brent prices, which were recovering early Wednesday after dropping on Tuesday following the break-up of talks amongst OPEC+ crude producers.
US oil futures approached a seven-year peak after the talks between the 23 members of the petroleum producers group were called off, an OPEC statement said, ending negotiations on a proposal to boost crude supply.
But investors quickly shifted course, selling off both Brent and West Texas Intermediate futures contracts, as investors fixated on a possible disintegration of any effort to rein in supply.
Brent oil was trading at USD75.15 a barrel early Wednesday, up from USD74.74 late Tuesday.
Gold gave back some recent gains, though was still managing to stay above the USD1,800 mark. Gold was quoted at USD1,802.07 an ounce early Wednesday, pulling back from USD1,804.50 on Tuesday.
At the top of London's mid-cap FTSE 250 index was Redrow, rising 4.7% as the housebuilder sounded upbeat amid a "strong" sales market.
Redrow said reservations per outlet per week for the financial year ended June 27 amounted to 0.70, compared with 0.67 for the 2020 year and 0.63 for the 2019 one. The continuing strong sales market, combined with the tapering of the UK stamp duty holiday at the end of June, has resulted in Homes turnover in the regional businesses being ahead of expectations, it said.
Redrow now expects revenue for the recently ended financial year to be around GBP1.94 billion, up from GBP1.34 billion the year before and approaching 2019's pandemic-free level of GBP2.11 billion. Redrow also expects an operating margin in excess of 15.5%, compared with 11.1% the year before and 19.5% two years ago.
"The group has entered the 2022 financial year with a very strong order book and the sales market remains robust. As a result, despite the earlier completion of the PRS block referred to above, the group expects 2022 turnover to be above GBP2 billion," said Redrow.
Housebuilding peer Vistry edged up 0.7% as it flagged a first-half performance was "significantly" ahead of internal expectations.
The FTSE 250 constituent highlighted a step-up in its average weekly private sales rate to 0.76 in the period, up sharply on 0.45 a year ago and the pre-pandemic rate of 0.69 in 2019.
"Importantly we are seeing sustained demand for units scheduled to complete in Q4 2021, post the end of the stamp duty holiday. With this strong demand, prices have increased across all geographies that we operate within," it noted.
The updates from the mid-cap housebuilders came as Halifax reported a slowdown in UK house price growth in June, as the stamp duty holiday starts to wind down.
House prices jumped 8.8% on an annual basis last month, slowing from May's 9.6% rise. On a monthly basis, prices fell 0.5% - the first monthly decline since January - after a 1.2% rise in May.
"It is important to put such a moderate decrease in context, with average prices still more than GBP21,000 higher than this time last year, following a broadly unprecedented period of gains," said Halifax Managing Director Russell Galley.
The house price slowdown in June comes as buyers eye a taper of the government's stamp duty holiday.
In March, UK Chancellor Rishi Sunak extended the stamp duty holiday from the end of that month until the end of June, and after this a new GBP250,000 threshold will apply until the end of September.
By Lucy Heming; lucyheming@alliancenews.com
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