(Alliance News) - The FTSE 100 was lower at midday on Thursday, with both Royal Dutch Shell and Lloyds Banking weighing on the blue-chip index, though smaller stocks in London were faring better.
Meanwhile, the euro was stronger going into the latest European Central Bank decision, as the single currency shook off some dire economic data from the eurozone.
The FTSE 100 index was down 47.68 points, or 0.8%, at 6,067.57 Thursday midday. The mid-cap FTSE 250 index was down 60.66 points, or 0.4%, at 16,774.68. The AIM All-Share index was up 0.4% at 816.95.
The Cboe UK 100 index was down 0.9% at 10,275.24. The Cboe 250 was down 0.8% at 14,447.67, and the Cboe UK Small Companies up 1.0% at 9,167.57.
"Hopes of further gains for the FTSE 100 after yesterday's solid push through 6,000 have been dashed for now thanks to Shell's decision to cut its dividend, along with disappointing performances for Lloyds and mining stocks that, taken together, have pushed the index into the red," commented Joshua Mahony at IG.
Meanwhile, stocks in mainland Europe saw morning's gains progressively eroded. Both the CAC 40 in Paris and DAX 30 in Frankfurt were flat in the early afternoon ahead of the ECB announcement.
The central bank for the eurozone releases its latest policy decision at 1245 BST followed by a press conference with President Christine Lagarde at 1330 BST.
"Attention now turns to the ECB, which is expected to follow up on the generally supportive tone from last night's Fed meeting. At the very least, the ECB's mandarins will be hoping for a much better result than last time, when an offhand comment on bond spreads from Christine Lagarde prompted investors to take flight," said Mahony.
The ECB update comes after a raft of woeful economic data from the eurozone.
The eurozone economy contracted 3.8% in the first three months of the year, and shrank 3.5% in the wider European Union, both on a sequential basis. In the fourth quarter of 2019, GDP had risen by 0.1% and 0.2% respectively.
"These were the sharpest declines observed since the time series started in 1995," Eurostat observed. "In March 2020, the final month of the period covered, Covid-19 containment measures began to be widely introduced by member states."
Annually, GDP fell 3.3% in the euro area and by 2.7% in the EU after growth of 1.0% and 1.3% in the final quarter of 2019. These were the steepest falls since the third quarter of 2009, when eurozone GDP fell 4.5% and the EU contracted 4.4%.
Separately, Eurostat said the annual inflation rate is expected to soften to 0.4% in April from 0.7% in March amid a slump in energy prices. Meanwhile, the unemployment rate nudged up to 7.4% in March from 7.3% in February.
The euro remained higher after the data. The single currency traded at USD1.0875 on Thursday against USD1.0855 late Wednesday.
Elsewhere in the economic calendar on Thursday, US jobless claims are at 1330 BST.
Sterling was quoted at USD1.2510 midday Thursday, up from USD1.2434 at the London equities close on Wednesday. Against the yen, the dollar was quoted at JPY106.61, flat on the day before.
Gold was quoted at USD1,715.20 an ounce on Thursday at midday in London, higher than USD1,702.03 on Wednesday at the equities close.
Ahead of the US, Wall Street is on course for a higher start. The Dow Jones is called up 0.3%, while the S&P 500 is seen 0.2% higher. The Nasdaq Composite is set to rise 0.6%.
Set to lift the Nasdaq on Thursday is social media giant Facebook, trading 8.6% higher in the New York pre-market after rallying 6.2% on Wednesday.
Facebook after Wednesday's market close reported a jump in usage and higher revenue as the global pandemic unfolded.
The social network reported profit of USD4.9 billion, on revenue that grew 17% to USD17.4 billion during the first three months of this year. Ranks of monthly active users grew 10% to 2.6 billion for the core Facebook platform.
In London, Royal Dutch Shell remained rooted to the bottom of the FTSE 100 after slashing its dividend by two thirds.
Shell 'A' shares were down 6.5% and 'B' shares down 6.9%.
The oil major's first quarter current cost of supplies earnings attributable to shareholders, excluding items, were USD2.9 billion, down 46% on a year ago due to a drop in oil, gas and liquefied natural gas prices as well as lower sales volumes.
Brent oil rose to USD26.31 a barrel on Thursday from USD22.90 late Wednesday, though started the year trading around the USD55 mark.
Shareholder returns are "a fundamental part" of Shell, the company said.
"However, given the risk of a prolonged period of economic uncertainty, weaker commodity prices, higher volatility and uncertain demand outlook, the board believes that maintaining the current level of shareholder distributions is not prudent."
It has slashed its first quarter dividend to 16 US cents. Shell has not cut it since World War Two, but there has not been a hike either since 2014. It paid out 47 cents each quarter in 2019.
Peer BP on Tuesday had declared a first-quarter dividend of 10.5 US cents, up 2.4% from 10.25 cents in the fourth quarter and first quarter of 2019.
Also lower was Lloyds Banking as first quarter profit was all but wiped out by impairment charges.
In the three months to March 31, Lloyds recorded pretax profit of just GBP74 million, down 95% on the GBP1.60 billion seen the same period the year before. Lloyds took a GBP1.43 billion impairment charge in the quarter, up from GBP275 million a year before, but the lender stressed its loan book remains "robust and well positioned".
The impairment charge was a result of changes to the group's IFRS 9 assumptions, given an expected deterioration in the UK economy as a result of Covid-19. IFRS 9 is an accounting ruling governing the valuation financial assets.
Royal Bank of Scotland, which reports its own first quarter results on Friday, was down 6.5%.
J Sainsbury shares dipped 4.2% as the supermarket chain cut its dividend and reported the Covid-19 crisis could hurt profit by GBP500 million.
In the financial year ended March 7, sales including VAT nudged 0.1% lower to GBP32.39 billion from GBP32.41 million. On a like-for-like basis, sales were down 0.6%. Pretax profit rose however to GBP255 million from GBP202 million.
Sainsbury's joined many other listed firms and opted not to make a final payout. It means the total dividend for the year has been slashed by 70% to 3.3 pence from 11.0p.
Looking to the financial year recently commenced, Sainsbury's said underlying pretax profit will be broadly unchanged year-on-year. This includes a hit of GBP500 million due to "significant costs" associated with protecting customers and employees from Covid-19, weaker fuel, general merchandise and clothing sales, and lower financial services profitability, offset by stronger grocery sales and business rates relief.
The top blue-chip performer was Flutter Entertainment, up 6.8%. The gambling operator said it will complete its Stars Group acquisition in Canada next week after obtaining shareholder approval.
Reckitt Benckiser rose 4.7%. The consumer goods firm posted a double-digit first quarter revenue rise, amid higher sales of hygiene and health products as a result of the virus pandemic, with the Dettol maker even nudging its 2020 outlook higher.
Reckitt said its "2020 performance is now expected to be better than original expectations" but conceded the "outlook for the balance of 2020 remains uncertain".
Total Reckitt sales climbed 12% to GBP3.54 billion in the quarter to March 31 and on a like-for-like basis, sales were 13% higher. The largest sales rise came from over-the-counter health products. These jumped by about a third to GBP618 million.
By Lucy Heming; lucyheming@alliancenews.com
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