LONDON MARKET OPEN: HSBC, Whitbread And BP Fail To Lift FTSE 100

(Alliance News) - Stock prices in London opened lower on Tuesday despite well-received earnings reports from blue chips HSBC, BP and Whitbread, against a backdrop of rising coronavirus cases and US stimulus uncertainty.

With Covid-19 cases on the rise nationwide in the US, the need for government stimulus has taken on a new urgency, especially as many support programs have expired or are about to, including a moratorium on foreclosures and evictions as well as loans for small businesses, which threatens to spark a wave of bankruptcies and homelessness.

After months of negotiations between US Treasury Secretary Steven Mnuchin and Democratic House Speaker Nancy Pelosi, time has nearly run out to get stimulus approved before President Donald Trump stands for reelection next week. Whether a measure can be approved in the "lame duck" session before the new Congress is seated in January is unclear.

In London early Tuesday, the FTSE 100 index was down 16.56 points, or 0.3%, at 5,775.45. The FTSE 250 was down 71.46 points, or 0.4%, at 17,781.84. The AIM All-Share was marginally lower at 975.61.

The Cboe UK 100 was down 0.3% at 574.68. The Cboe 250 was down 0.5% at 15,0328.56. But the Cboe Small Companies was up 0.1% at 9,700.09.

In Paris the CAC 40 was down 0.6%, while the DAX 30 in Frankfurt was down 0.3%.

On the London Stock Exchange, HSBC Holdings was the best blue-chip performer, up 5.2% after the Asia-focused bank reported third-quarter earnings that beat market forecasts.

HSBC is London's fourth-biggest company by market capitalisation. The stock had ended up 4.7% in Hong Kong.

In the three months to September 30, pretax profit dropped 37% year on year to USD3.07 billion from USD4.84 billion. However, the figure beat the company-supplied consensus estimate of USD2.07 billion.

Revenue fell 11% to USD11.93 billion from USD13.36 billion.

This was partly offset by cutting operating expenses to USD8.04 billion from USD8.15 billion and a reduction in expected credit losses to USD785 million from USD883 million the year before. HSBC also noted its third-quarter expected credit losses are sharply below the previous quarter's USD3.83 billion hit.

HSBC's performance bodes well for the rest of the UK banking sector, with Standard Chartered, Lloyds Banking Group and NatWest reporting on Wednesday, Thursday and Friday respectively. Barclays reported on Friday last week, also showing improvement in the third-quarter on lower credit impairments.

StanChart was up 2.0%, Lloyds up 1.3%, NatWest up 0.9% and Barclays up 0.8%.

Whitbread was up 1.7% after the Premier Inn hotel chain owner said its half-year performance was in-line with expectations and reflected the closure of the vast majority of its businesses during the lockdown period in the UK from the end of March.

For the six months to August 27, Whitbread swung to a pretax loss of GBP724.7 million from a profit of GBP219.9 million a year before, while revenue fell 77% to GBP250.8 million from GBP1.08 billion. Whitbread declared no interim dividend, having paid out 32.7 pence last year.

The hospitality firm said it has rapidly reopened its estate, with 97% of UK hotels reopened by the end of July, and has subsequently grown its market share. Since reopening, UK accommodation sales performance has been ahead of the market, benefiting from the fast reopening and the strength of the Premier Inn brand, it asserted.

Whitbread said UK occupancy levels have steadily improved on a weekly basis, averaging 51% in August, while UK restaurant performance was boosted by the positive impact of the Eat Out to Help Out scheme. August UK total sales improved to 39%. Occupancy improved again in September, rising to 58%.

BP was up 1.5% after the oil major said its third-quarter performance showed signs of improvement despite a difficult environment brought about by the coronavirus pandemic.

For the third quarter ended September 30, BP posted a loss of USD450 million, narrowed from USD749 million last year; however its replacement cost loss widened to USD644 million from USD351 million.

Underlying replacement cost profit, the company's preferred measure, was USD100 million, compared with a loss of USD6.7 billion in the second quarter, and USD2.3 billion profit for the third quarter of 2019.

BP said that compared to the second quarter, the results benefited from the absence of significant exploration write-offs and recovering oil and gas prices and demand. This was partly offset by significantly lower oil trading result.

BP declared a third-quarter dividend of 5.25 US cents, halved from 10.25 cents in the third quarter last year.

At the other end of the large caps, St James's Place was down 2.5% after the wealth manager reported a drop in third-quarter inflows.

For the quarter ended September 30, St James's Place reported gross inflows of GBP3.05 billion, down from GBP3.74 billion in the same period last year. Net inflows were GBP1.44 billion, down from GBP2.11 billion =.

Closing funds under management were GBP118.7 billion, up from GBP112.82 billion last year.

Rio Tinto was down 1.5% after Liberum downgraded the Anglo-Australian miner to Sell from Hold.

The pound was quoted at USD1.3038 early Tuesday, up from USD1.3017 at the London equities close Monday.

The euro was priced at USD1.1832, up from USD1.1818 late Monday. Against the yen, the dollar was trading at JPY104.72, lower from JPY104.85.

Brent oil was trading at USD40.62 a barrel Tuesday morning, up from USD40.38 late Monday. Gold was quoted at USD1,902.01 an ounce, flat from USD1,903.80.

The Japanese Nikkei 225 index closed marginally lower. In mainland China, the Shanghai Composite ended up 0.1%, while the Hang Seng index in Hong Kong finished down 0.7%. Markets in Hong Kong reopened on Tuesday after being closed for a holiday on Monday.

The economic calendar for Tuesday has eurozone monetary developments at 0900 GMT. The afternoon has the US advance report on durable goods at 1230 GMT and the Johnson Redbook retail sales index at 1255 GMT.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.