LONDON MARKET PRE-OPEN: BP Sees Improvement In Third Quarter

Tue, 27th Oct 2020 07:54

(Alliance News) - Stock prices in London were expected to stage a small rebound on Tuesday following sharp losses on Monday.

In early corporate news, oil major BP said its third quarter showed improvement against a challenging backdrop. Lender HSBC reported third-quarter profit that beat market forecasts. Wealth manager St James's Place reported a record third quarter for funds under management. Premier Inn-owner Whitbread swung to a first-half loss and axed its dividend as the Covid-19 pandemic lockdowns hit earnings.

IG futures indicate the FTSE 100 index will open 13.39 points higher at 5,805.40. The blue-chip index closed 68.27 points lower, or 1.2%, at 5,792.01 Monday.

BP 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 USD45 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.

Looking ahead, BP said the ongoing effects of the Covid-19 pandemic continue to create a volatile and challenging trading environment. There have been some early signs of global economic recovery as countries move to more regional or localised restrictions on movement and governments continue to offer monetary and fiscal policy stimulus. However, the shape and pace of the recovery is uncertain, as it depends on the further spread of the pandemic.

HSBC Holdings reported a sharp drop in third-quarter profit, but was "pleased" with significantly reducing its credit losses and is considering a "conservative" shareholder payout for 2020.

HSBC is London's fourth-biggest company by market capitalisation. The stock is up 4.8% in Hong Kong.

In the three months to September 30, the Asia-focused lender's 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.

St James's Place said its funds under management came in at a record high in the third quarter

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 and 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.

"Funds under management closed the period at a record GBP118.7 billion, up 1.5% year to-date. This performance highlights the strength and resilience of our business in these more difficult times," said CEO Andrew Croft.

"Looking ahead, the increased uncertainty linked to COVID-19 will inevitably influence client investment confidence and consequent decision-making. However, drawing on the experience of the last six months, I am confident that the Partnership will continue to adapt to whatever circumstances they face in order to establish long-term relationships with new clients through the provision of high-quality advice, and retain clients through maintaining outstanding service," Croft added.

Whitbread 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%.

"Whitbread's long-term strategy remains as relevant and compelling as ever. The impact of the Covid pandemic on the hotel sector will undoubtedly be significant and we are already seeing signs of distress and constraint in the competitive landscape. This is likely to accelerate the structural changes in the market with supply contraction and constrained investment amongst independent and budget branded operators in both the UK and Germany," said Chief Executive Alison Brittain.

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

More than eight million people in England will be under the most stringent coronavirus restrictions when Nottingham and Warrington move into Tier 3 this week.

Tougher measures will come into force in the Midlands city and the boroughs of Broxtowe, Gedling and Rushcliffe on Thursday, with details expected to be set out on Tuesday.

Households will be banned from mixing indoors or in private gardens and beer gardens, while betting shops, adult gaming centres, casinos and soft play centres will also close.

The UK government also said a further 102 people had died within 28 days of testing positive for Covid-19 as of Monday, while there were a further 20,890 lab-confirmed cases of coronavirus in the UK.

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 USD40.82 a barrel Tuesday morning, up from USD40.38 late Monday. Gold was quoted at USD1,909.01 an ounce, higher from USD1,903.80.

US policymakers held another round of talks Monday on a new spending package to aid the virus-hit economy, but the negotiations have lost momentum, dimming hopes an agreement can be reached before the November 3 election.

With Covid-19 cases on the rise nationwide, the need for 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 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.

The Japanese Nikkei 225 index closed marginally lower. In mainland China, the Shanghai Composite ended up 0.2%, while the Hang Seng index in Hong Kong is down 0.4%. 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