LONDON MARKET OPEN: Oil Majors Up After OPEC+ Scales Back Output Hike

Fri, 04th Dec 2020 08:48

(Alliance News) - The FTSE 100 was higher in early trade on Friday, with London's benchmark index getting an early boost from oil majors after Thursday's OPEC+ meeting, though an interim earnings fall from Berkeley sent the housebuilding sector lower.

The FTSE 100 index was up 42.41 points, or 0.7%, at 6,532.51 early Friday. The mid-cap FTSE 250 index was up 62.42 points, or 0.3%, at 20,194.86. The AIM All-Share index was up 2.33 point, or 0.2%, at 1,068.54.

The Cboe UK 100 index was up 0.7% at 650.99. The Cboe 250 was up 0.4% at 17,514.63, and the Cboe Small Companies up 0.1% at 11,669.40.

The FTSE 100 also got a boost from a weaker pound, as Brexit talks are due to continue on Friday amid warnings the prospect of a breakthrough is "receding".

The pound was quoted at USD1.3462 on Friday morning, down from USD1.3485 at the London equities close on Thursday.

Negotiations between the UK and EU seemed to stall on Thursday, with Britain claiming Brussels was calling for fresh concessions at the 11th hour.

The euro stood USD1.2164 on Friday morning, up from USD1.2153.

In mainland Europe, the CAC 40 in Paris was up 0.4% but the DAX 30 in Frankfurt was down 0.1%.

"Disappointing vaccine news combined with US stimulus optimism, Brexit nerves and strong German factory orders are painting a mixed picture ahead of today's [US] non-farm payroll report," GAIN Capital analyst Fiona Cincotta said.

"News that Pfizer has cut its rollout target for the covid vaccine by half, owing to supply chain obstacles has knocked risk sentiment. Then news from Pfizer means that it could now take longer to reach the end of the pandemic tunnel, but with other vaccines also coming, this is more of a setback rather than risk reset news."

In London, Royal Dutch Shell's A shares and B shares rose 2.0% and 2.1%, respectively, and BP climbed 2.2%. Among mid-caps, Premier Oil was the best performer, up 7.1%.

Commodity traders took heart from news that members of the OPEC+ cartel struck a deal to increase production over the coming months, but by less than anticipated in their previous accord.

The news also boosted oil majors elsewhere. French firm Total climbed 1.2% in Paris, while Exxon Mobil rose 0.4% after hours in New York on Thursday.

Brent oil fetched USD49.80 on Friday morning, improved from USD48.50 a barrel at the London equities close on Thursday.

Elsewhere in the blue-chip index, Berkeley fell 2.2%, the worst performing FTSE 100 stock.

The housebuilder posted a first-half earnings fall but outlined plans for a previously deferred GBP455 million to go towards "incremental new land investment or enhanced cash returns".

Pretax profit in the six months ended October 31 fell 17% to GBP230.8 million on revenue which slipped 3.8% to GBP895.9 million.

The company sold 1,104 homes during the period, down 21% from 1,389 a year earlier, though the average selling price rose 24% to GBP799,000.

Back in June, Berkeley deferred for up to two years a GBP455 million return of surplus capital, due to Covid-19 uncertainty. It had been due to be delivered by March 2021.

On Friday, the company confirmed the previously earmarked sum will now be delivered by the end of April 2023, "through either enhanced cash returns to shareholders, incremental land investment or a combination thereof".

Peers Persimmon and Taylor Wimpey lost 0.5% and 1.3% in early dealings on Friday.

Associated British Foods rose 2.0%, after it said sales in the days since Primark fast-fashion stores lifted shutters once again have been "very strong".

However, lockdown measures have been costly, AB Foods said it lost GBP430 million in autumn sales.

"The operating costs of the stores which were closed were reduced by some 25% during this period of closure. All orders placed with our suppliers have been honoured," Chair Michael McLintock will tell the diversified firm's annual general meeting Friday.

AB Foods expects both Primark's annual sales and profit to be higher year-on-year and, elsewhere, its Grocery, Sugar, Ingredients and Agriculture units are trading ahead of expectations.

Against the Japanese yen, the dollar was trading at JPY103.90, improved from JPY103.73.

"The focus in the US today will be mostly on the performance of the labour market with the release of the employment report for November," Daiwa Europe Chris Scicluna said.

"Daiwa America chief economist Mike Moran has pencilled in a 500,000 gain in total non-farm payrolls â€“ slightly above the median market forecast of 475,000 in Bloomberg's survey â€“ which would be the smallest increase since the recovery began (in part weighed down by further job losses in the government sector). While the household survey is unlikely to repeat the bumper increase in employment reported in October, Mike still expects the unemployment rate to nudge down a further 0.2 percentage points to 6.7%."

In data already out, Germany's factory orders rose above consensus in October, according to official data, with numbers suggesting the sector has recovered from the damage caused by Covid-19.

German factory orders climbed 2.9% monthly in October, beating consensus estimates of a 1.5% rise. Data also showed a 1.8% annual rise in factory orders, a sizeable beat on market estimates which had tipped a 2% fall. In September, factory orders were 1.1% annually but rose 1.1% monthly.

The index of new orders in manufacturing read 103.4 points in October, not only up from 100.5 in September, but above the 102.6 reading in February.

"Compared with February 2020, the month before restrictions were imposed due to the corona pandemic in Germany, new orders in October 2020 were 0.8% higher in seasonally and calendar adjusted terms," Destatis added.

Before the US jobs report, Friday's economic calendar has a UK construction PMI at 0930 GMT and Irish gross domestic product data at 1100 GMT.

Gold was quoted at USD1,841.89 an ounce, up from USD1,826.52 at the London equity market close on Thursday.

By Eric Cunha; ericcunha@alliancenews.com;