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(Alliance News) - Stock prices in London were seen opening marginally higher on Thursday despite sharp declines by Asian equity markets, as investors await an interest rate decision from the European Central Bank in the afternoon.
In early company news, Royal Dutch Shell pledged additional returns to shareholders following the sale of its Permian Basin assets. The new Lloyds Banking chief executive made a positive start to his tenure. Packing firm DS Smith said trading in the first half has been in line with expectations.
IG futures indicate the FTSE 100 index is to open 5.23 points higher at 7,258.50. The blue-chip index closed down 24.35 points, or 0.3%, at 7,253.27 Wednesday.
"European markets underwent a modest pullback yesterday with modest losses across the board; however there was little in the price action to suggest that the declines were anything other than a brief pause in the overall move higher, with shares set to open unchanged later this morning, despite a sell-off in Asia markets," said CMC Markets analyst Michael Hewson.
Shell swung to a loss in the third quarter against a backdrop of activist investor pressure.
Shell on Wednesday said it held talks with Third Point, after the activist shareholder went as far as suggesting the oil major should be split up. Reuters, citing a source close to the matter, on Wednesday reported activist investor Daniel Loeb's Third Point has built a stake worth nearly USD750 million in Shell.
For the three months to September 30, Shell posted adjusted earnings of USD4.1 billion, down from USD5.5 billion in the second quarter, but surging from USD955 million in the third quarter last year.
However, Shell swung to a third quarter loss attributable to shareholders of USD447 million, from a USD489 million profit a year ago, and also swung to a current cost of supplies attributable loss of USD988 million from a USD177 million profit a year ago. Shell said the attributable losses included a USD5.2 billion non-cash charge related to the fair value accounting of commodity derivatives.
Turning to shareholder returns, Shell declared a quarterly dividend of USD0.24, steady on the second quarter and up from USD0.1665 paid out for third quarter a year ago.
Shell said USD1.0 billion in buybacks were completed in the third quarter out of USD2 billion planned for the second half. In addition, Shell said a USD7 billion return is in store for shareholders in 2022 following the sale of its Permian assets in the south west US to ConocoPhillips earlier this year.
"This quarter we've generated record cash flow, maintained capital discipline and announced our intention to distribute USD7 billion to our shareholders from the sale of our Permian assets. Today, we also set a new 2030 target to halve the absolute emissions from our operations, compared to 2016 levels on a net basis. Altogether, this is clear evidence of how we are accelerating our Powering Progress strategy, purposefully and profitably," said Chief Executive Officer Ben van Beurden.
Lloyds Banking Group reported a rise in third-quarter earnings in Charlie Nunn's maiden results report at the helm of one of the UK's largest lenders.
For the third quarter to September 30, net income was up 20% to GBP4.08 billion from GBP3.40 billion last year, and net interest income rose 8.8% to GBP2.85 billion from GBP2.62 million.
Lloyds posted pretax profit of GBP2.03 billion, almost doubled from GBP1.04 billion last year, with net interest margin of 2.55%, up from 2.42%.
Looking ahead for 2021 as a whole, Lloyds expects net interest margin to be modestly above 250 basis points and also continues to target a return on tangible equity in excess of its cost of equity in the medium term.
"Building on the strengths of the group and its achievements in recent years, there are clearly significant opportunities for Lloyds Banking Group to further develop its platforms and capabilities and grow through disciplined investment, empowering colleagues, enhancing collaboration and increasing agility across the group. This can be built on the foundation strengths of customer service, distribution, and cost management," CEO Nunn said.
DS Smith said its performance in the six months to this coming Sunday remained in line with expectations. The packaging company pointed to very positive box volume growth, good cost recovery through increasing pricing, and an enhanced performance from its US business which offset significant input cost increases.
DS Smith said corrugated box volume growth was strong throughout the first half with the consumer goods sector accounting for over 80% of volume.
"Looking forward, whilst the macro-economic environment remains uncertain, sustainability and the circular economy, together with e-commerce and digital enablement, remain more relevant than ever and are strong structural drivers of growth. Our long-term strategic focus in these areas as a solely fibre based business together with our comprehensive supply coverage, innovation platforms and robust supply chains, underpin our confidence in the prospects for the business," said Chief Executive Officer Miles Roberts.
Advertising firm WPP reported third-quarter revenue of GBP3.24 billion, up 9.1% from a year before or 15% like-for-like. Revenue less pass-through costs was GBP2.64 billion, up 9.9% or 16% like-for-like.
WPP raised its full-year 2021 guidance, expecting like-for-like growth in revenue less pass-through costs of 11.5% to 12%, with a headline operating margin slightly above 14%.
The ECB Governing Council meets in Frankfurt on Thursday, announcing its latest policy decision at 1245 BST. This will be followed by a press conference with President Christine Lagarde at 1330 BST.
The euro was priced at USD1.1605, up from USD1.1592 ahead of the ECB rate decision. The central bank is widely expected to keep interest rates unchanged.
Fears over rising inflation and pressure on central banks to tighten monetary policy sent markets in Asia lower, as investors contemplate the end of the era of cheap cash, amid a spike in Covid infections.
The Bank of Canada on Wednesday said it would end its vast bond-buying programme and flagged an interest rate hike earlier in 2022 than previously envisaged.
The Japanese Nikkei 225 index closed down 1.0%. In China, the Shanghai Composite was down 1.2%, while the Hang Seng index in Hong Kong was down 0.1%. The S&P/ASX 200 in Sydney ended down 0.3%.
Against the Japanese yen, the dollar was trading at JPY113.58 in London, down from JPY113.80 late Wednesday.
The Bank of Japan on Thursday announced its decision by an 8-1 majority vote to keep its key interest rate at negative 0.1%.
In addition, the central bank said that it would keep its loose monetary policy unchanged, choosing to continue expanding the monetary base until the annual rate of increase in the consumer price index exceeds 2% and remains above the target "in a stable manner".
The BoJ noted that the pandemic has continued to weigh on Japan's economy, to the point that it has lowered its growth forecast for the year ending March 2022 to 3.4% growth, compared to the previous guidance of 3.8%.
However, reflecting a more positive longer-term outlook, the BoJ lifted up its growth forecast for the year to March 2023 to 2.9% from a prior estimate of 2.7%.
"The Bank of Canada yesterday ended its own bond buying program, while there is speculation that the RBA could do the same next week, while the Bank of England could also to act to nudge rates higher by the end of this year. The only two central banks who don't look anywhere near calling to a halt to their own emergency programs are the Bank of Japan, who met earlier today, and the European Central Bank, who are due to announce their decision later, although there aren't any surprises expected," noted CMC's Hewson.
The pound was quoted at USD1.3744 early Thursday, up from USD1.3726 at the London equities close Wednesday.
Brent oil was quoted a USD83.78 a barrel Thursday morning, down from USD85.32 late Wednesday. Gold stood at USD1,803.52 an ounce, higher against USD1,792.13.
Thursday's economic calendar has German unemployment at 0855 BST and inflation at 1300 BST, while US GDP and the latest initial jobless claims numbers are at 1330 BST.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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