European shares traded higher on Tuesday as corporate results and hopes of central bank stimulus did enough to entice investors back into markets. The FTSE 100 was higher by around 0.2%, recovering some of Monday’s modest losses.
Former government monopolies top-and-tailed Britain’s benchmark stock index, with BT (LON:BT) shares on the rise after Ofcom ruled it should run Openreach, whilst BP (LON:BP) shares dropped following quarterly results.
Shares of BP dropped as much as 2.5% after the oil major reported a steeper-than-expected fall in profits in the second quarter. Underlying replacement cost profit was $720m, up from $532m in the previous quarter but well below the $1.3m for Q2 2015.
The negative reaction in the share price could have been worse when put into the context of the 10% oil price decline in July, but BP finally drawing a line under its Deepwater Horizon oil spill liabilities was a source of relief.
BP’s downstream business continues to be the main breadwinner, but a warning that refining margins would stay under pressure worried investors this couldn’t be maintained. The upstream business did return to profitability since oil prices rebounded from lows earlier this year.
The British pound dropped before rebounding off its lows after Bank of England rate-setter Martin Weale said “immediate measures may be needed” to combat a slowdown in the economy following a drop in business sentiment data. Weale’s comments were a surprise coming off his suggestion a week ago that there was “no need for a rate cut.” The perception that Mr Weale has developed a recent penchant for flip-flopping may be why the decline in sterling wasn’t sustained.
US stocks look set for a lower start on the first day of the two-day Federal Reserve meeting, ahead of another big day for quarterly earnings reports including Starwood Hotels (NYSE:HOT), Twitter (NYSE:TWTR) and Apple (NASDAQ:AAPL).
USA pre-opening levels
S&P 500: 3 points lower at 2,165
Dow Jones: 14 points lower at 18,479
Nasdaq 100: 9 points lower at 4,656
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