LONDON MARKET OPEN: Oil Majors Rise As Saudi Aramco Sees Signs Of Life

(Alliance News) - Stock prices in London opened higher on Monday with oil majors lifting the FTSE 100 after positive comments from Saudi Aramco on the outlook for the world energy market.

The gains in London occurred despite US lawmakers' inability to find common ground on stimulus for the world's top economy.

Responding to collapsed talks, US President Donald Trump signed four executive orders on the economy on Saturday, following through on a threat to act on his own if Congress did not pass a new stimulus bill.

One order provides enhanced unemployment benefits while a second would give relief on student loan repayments. A third order is a federal ban on housing evictions. The fourth suspends certain taxes on salaries.

Top Democrats Nancy Pelosi and Chuck Schumer slammed Trump's announcement, calling the measures "unworkable, weak and narrow."

In London early Monday, the blue-chip FTSE 100 index was up 40.14 points, or 0.6%, at 6,072.32. The mid-cap FTSE 250 index was up 142.69 points, or 0.8%, at 17,765.62. The AIM All-Share index was up 0.2% at 934.48.

The Cboe UK 100 index was up 0.8% at 604.69. The Cboe 250 was up 0.6% at 15,080.68, and the Cboe Small Companies was flat at 9,267.65.

In mainland Europe, the CAC 40 index in Paris was up 0.3%, while the DAX 30 in Frankfurt was up 0.1%.

In the FTSE 100, oil majors BP, Royal Dutch Shell 'A' and 'B' shares were up 2.7%, 2.1% and 2.0%, respectively, after sSaudi Aramco said it sees signs of oil market recovery.

Brent oil was trading at USD44.88 a barrel Monday morning, up from USD44.60 at the London equities close Friday.

"Oil is pushing higher on Monday, extending last week's gains, boosted by upbeat data from the US and China and by a bullish demand picture from Saudi Aramco, the largest oil producer in the world. State owned Aramco's chief executive said that oil consumption in Asia, Aramco's biggest market has almost returned to pre-Covid levels," said City Index analyst Fiona Cincotta.

Saudi Aramco said on Sunday its second-quarter profits plunged a massive 73% due to sharply lower oil prices as the coronavirus crisis undercuts global demand.

The Saudi Arabian firm, recently dethroned by Apple as the world's most valuable listed company, posted a net profit of USD6.6 billion for the three months to June 30, down from USD24.7 billion for the same period of 2019.

The results are in line with analysts' expectations and stand in contrast to the losses reported by its rival energy giants, which are reeling from a drop in oil demand since the start of the novel coronavirus pandemic.

Aramco's results reflected its "financial resilience", Chief Executive Amin Nasser said, as the company presses ahead with a plan to pay USD75 billion in dividends this year.

Nasser also voiced optimism over what he called a "partial recovery in the energy market" amid an easing of virus restrictions in some countries.

Saudi Aramco shares were trading 0.1% higher in Riyadh on Monday at SAR33.10 each.

In the FTSE 250, Clarkson was the best performer, up 12% after the shipping services company said it saw a robust first-half performance in 2020, despite the "unprecedented challenges" faced by the shipping industry.

For the half-year ended June 30, revenue was up 7.5% at GBP180.4 million from GBP167.8 million the year before, and pretax profit was up 9.0% at GBP20.9 million from GBP19.2 million. The shipping services provider said it has a robust balance sheet, with GBP88.8 million of free cash resources.

In light of the strong cash position, Clarkson has decided to pay the equivalent of the deferred 2019 final dividend of 53 pence per share as an interim dividend. The company also declared a further interim dividend for 2020 of 25p per share, unchanged from last year.

FirstGroup and Go-Ahead Group were up 8.5% and 3.5% respectively after the public transport firms welcomed the UK government's decision to extend the funding of bus services.

The funding package - which is under the Covid-19 Bus Service Support Grant Restart - will last for eight weeks, after which weekly funding of up to GBP27.3 million will be made available until a time that it is no longer ended.

In addition, the UK government has announced plans to publish a National Bus Strategy, to set out its plans for supporting continued bus services across the country.

Aberdeen-based FirstGroup in particular welcomed the funding, and noted Scotland's announcements that it would spend an additional GBP68 million to extended to November 8 the similar funding scheme it has in place for its bus operators.

FirstGroup said the funding programme has already helped to improve bus service capacity, with First Bus operations across England having increased operated mileage to 90% of pre-pandemic levels from 40%, while passenger volumes have increased to 40% from 10% of normal levels since the low point in March.

Capita was up 4.5% after the outsourcer said it has obtained an extension for its Transport for London contracts managing the capital city's congestion charge, low emission zone, and ultra low emission zone.

The GBP355 million deal includes an extension to Capita's work on existing schemes to October 2026 from October 2021. It also includes new work associated with expanding the ultra-low emission zone, direct vision standards, and low emission zone to October 2025 along with their operations.

In Asia, the Shanghai Composite closed up 0.8%, while the Hang Seng index in Hong Kong is down 0.1%. Financial markets in Japan were closed for a holiday.

China's consumer inflation edged up in July, official data showed Monday, partly because of rising food prices from flood-related disruptions and as the country recovers from the coronavirus outbreak.

The consumer price index, a key gauge of retail inflation, had been pushed up over the past year by livestock prices after China's pig herds were ravaged by African swine fever, with the Covid-19 outbreak later hitting supply chains.

Consumer inflation has been easing since January but ticked up again in recent months, with the CPI annual growth rate hitting 2.7% last month, accelerating from 2.5% in June, according to the National Bureau of Statistics.

The pound was quoted at USD1.3070 early Monday, up from USD1.3050 at the London equities close on Friday.

The euro was priced at USD1.1794, flat from USD1.1789. Against the yen, the dollar was trading at JPY105.77 in London, soft from JPY105.86 late Friday.

Gold was quoted at USD2,030.02 an ounce, soft from USD2,032.40.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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