LONDON MARKET CLOSE: Weak Shell results hit FTSE; Apple earnings ahead

(Alliance News) - A disappointing set of quarterly earnings from oil major Royal Dutch Shell held back the FTSE 100 on Thursday.

However, the mood was brighter on Wall Street as investors gear up for the latest results from iPhone maker Apple and e-commerce titan Amazon.com.

The FTSE 100 index closed down 3.80 points, or 0.1%, at 7,249.47 on Thursday. The FTSE 250 ended up 27.83 points, or 0.1%, at 23,199.87, and the AIM All-Share closed down 1.83 points, or 0.2%, at 1,224.18.

The Cboe UK 100 ended down 0.2% at 717.78, the Cboe UK 250 closed flat at 20,813.07, and the Cboe Small Companies ended down 0.3% at 15,424.00.

"European markets have had a mixed session today, with the FTSE 100 and DAX lagging the rest of Europe. The UK index has underperformed due to weakness in the oil and gas sector, while the DAX has been dragged by Volkswagen," said Michael Hewson, chief market analyst at CMC Markets.

Royal Dutch Shell 'A' and 'B' shares closed down 3.0% and 3.5% respectively in London, the oil major weighing on the FTSE 100 index, after posting third-quarter earnings which missed market forecasts against a backdrop of activist investor pressure.

For the three months to September 30, the oil major reported 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. The latest figure widely missed the company-compiled consensus estimate of USD5.3 billion.

"Normally one shouldn't get too hung up over a mere three months' trading, but this was meant to be Shell's big quarter, given the surge in oil and gas prices in the past few months. Sadly, it has missed earnings forecasts and left investors feeling frustrated," said Russ Mould, investment director at AJ Bell.

The results came a day after confirming it had 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 Daniel Loeb's Third Point has built a stake worth nearly USD750 million in Shell.

Peer BP, which reports quarterly results next week, ended down 1.6% in a negative read-across.

Also hindering the oil majors was a further pullback in crude prices. Brent oil was quoted at USD83.94 a barrel at the London equities close Thursday, from USD85.32 late Wednesday.

Topping the FTSE 100, meanwhile, was WPP after a robust third-quarter performance prompted the marketing and advertising agency to raise its annual guidance.

The stock closed up 8.1%.

For the third quarter to September 30, WPP posted 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.

On the back of the strong performance, WPP raised its full-year 2021 guidance, expecting like-for-like growth in revenue less pass-through costs of 11.5% to 12%, up from 9% to 10% previously guided. In addition, headline operating margin is expected slightly above 14%.

In European equities on Thursday, the CAC 40 in Paris rallied 0.8%, while the DAX 40 in Frankfurt ended down 0.1%.

In Frankfurt, shares in Volkswagen tumbled 4.0% after the German carmaker said operating profit and sales fell in the third quarter, as a global shortage in chips hampered production of its vehicles.

The group's operating profit before special items plunged 12% in the third quarter compared with the same "weak" pandemic-blighted period last year to EUR2.8 billion, with its mass-market brands, including VW, suffering an overall operating loss.

In addition, Chief Executive Herbert Diess made it clear that he expects job cuts at the carmaker's headquarters in the coming years, amid the debate over the future of the main factory in the northern German city of Wolfsburg.

In recent weeks, there has been speculation over a reduction of about 30,000 jobs in the core brand VW Passenger Cars. Diess did not want to comment on concrete figures. "That has not been decided yet," he said.

Focus in Europe on Thursday lay on the European Central Bank, with the euro rising in the wake of the central bank's decision to keep interest rates unchanged as traders honed in on the central bank's inflation focus.

Supply bottlenecks and energy price rises and one-off pandemic related effects meant that inflation "will last longer than originally expected", ECB President Christine Lagarde said in a press conference. Deliberations in the Thursday meeting were all about "inflation, inflation, inflation", Lagarde said, hinting at an energetic debate between members of the governing council.

ING commented: "If today's ECB meeting was characterised by three words, 'inflation, inflation, inflation', then the December meeting could in our view be characterised by three other words: 'tapering, tapering and tapering'."

The euro stood at USD1.1682 at the European equities close Thursday, rising from USD1.1592 at the same time on Wednesday.

More broadly, the dollar was on the back foot Thursday after data showed the US economic recovery slowed in the third quarter of 2021.

Gross domestic product expanded at an annual rate of just 2.0% in the third quarter, slowing from 6.7% in the prior three months, as consumer spending moderated.

The pound was quoted at USD1.3808 at the London equities close Thursday, up compared to USD1.3726 at the close on Wednesday. Against the yen, the dollar was trading at JPY113.29, falling from JPY113.80 late Wednesday.

Gold broke above the USD1,800 barrier as the dollar weakened. Gold was quoted at USD1,802.81 an ounce at the London equities close Thursday, against USD1,792.13 at the close on Wednesday.

Wall Street shook off the tepid US GDP data, however. Stocks in New York were in the green at the London equities close, with the DJIA up 0.5%, the S&P 500 index up 0.8%, and the tech-heavy Nasdaq Composite up 1.1%.

Shares in Apple were rallying 2.7% ahead of the iPhone maker's fourth quarter results due after the New York market close. E-commerce giant Amazon, which reports third quarter results late Thursday, was up 1.5%.

Back in London, Airtel Africa rose 11% to top the FTSE 250 after raising its interim dividend following a strong first half that saw profit more than double. Pretax profit rose sharply to USD567 million for the half year ended September 30 from USD281 million a year earlier, prompting a dividend boost to 2 cents from 1.5 cents.

Bytes Technology rose 7.6% after reporting double-digit growth in profit and revenue for the first half of its financial year, driven by stronger client demand and a rise from public sector customers.

For the six months ended August 31, the Surrey, England-based computer software firm posted a pretax profit of GBP22.9 million, up 17% from GBP19.5 million, which Bytes attributed to solid customer acquisition trends across both public and private sectors.

C&C advanced 6.0% after the Bulmers maker swung to interim profit of EUR7.1 million on a 70% surge in revenue to EUR657.3 million.

"We are encouraged by how quickly the on-trade recovered," said Chief Executive Officer David Forde, "and we are pleased to report that trading in the first half has been ahead of plan and our inherent cash generating strengths are reflected in the return of the business to cash generation from June 2021."

At the bottom of the mid-cap index ended Helios Towers, down 5.8% despite posting rising revenue and earnings amid the company's strongest quarter of organic tenancy additions in six years. Adjusted earnings before interest, tax, depreciation and amortisation increased 5% year-on-year to USD175.0 million.

As a busy week for earnings in the UK draws to a close, Friday sees third quarter results from lender NatWest and output results from miner Glencore. ConvaTec, Computacenter and Hilton Food Group all put out trading updates.

The economic calendar on Friday has Japanese unemployment overnight, German GDP at 0900 BST and eurozone inflation and GDP at 1000 BST. US core personal consumption expenditures are due at 1330 BST.

By Lucy Heming; lucyheming@alliancenews.com

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