- FTSE 100 opens higher lifted by oil majors
- Shell (LON:RDSa) advances, dividend to rise, $4bn buy back announced
- ECB rate decison awaited, US GDP figures due later
9.00am: FTSE 100 opens higher boosted by oil majors
FTSE 100 made a strong start, on a busy day of corporate results, boosted by gains in oil major Shell PLC which promised an increase to its fourth quarter dividend as it unveiled third quarter figures this morning.
The oil giant also announced a further $4bn share buy back programme which helped push the company to the top of the FTSE 100 risers and pulled BP PLC (LON:BP) higher as well, up 2.2%.
By 8.50am London’s blue-chip index had advanced by 15 points to 7,071 while the FTSE 250 slipped 48 points to 18,058.
Aside from the weighty number of company results, investors will have one eye on the ECB’s interest rate decision later today and US GDP figures due for release this afternoon.
Victoria Scholar, Head of Investment, interactive investor said: “Focus turns to the European Central Bank’s rate decision at lunchtime which is expected to announce the second 75 basis point hike in a row as it looks to get to grips with inflation in the euro zone.”
“In the US, investors will be looking for further signs of an economic slowdown stateside with the release of its latest GDP growth figures.”
Lloyds Banking Group PLC (LON:LLOY) remained a weak feature, down 1.8%, as it reported a sharp increase in bad debt provisions which knocked its profits with pre-tax profits down 26% to £1.5bn.
But John Moore, senior investment manager at RBC Brewin Dolphin, said: “Lloyds may be putting aside more money for potential bad loans against the current economic backdrop, but that overshadows a strong set of results from the bank.”
“Although it is the most exposed of the major UK banks to the domestic economy, Lloyds is benefitting from an improving net interest margin, which is driving income growth.”
Foxtons (LON:FOXT) Group PLC pleased the market today reporting strong third-results and forecasting that full year results will top expectations.
The estate agent said third quarter revenue increased by 25% compared to the same period in 2021, up to £43.8mln from £35.1mln.
Across the group’s different sectors, lettings revenue rose 18% compared to the third quarter last year, with sale and financial services revenue jumping 44% and 37% respectively, Foxtons (LSE:FOXT) added.
Peel Hunt suggested that profits could be ahead of forecasts by as much as £2mln.
The broker reiterated its buy rating and 55p price target.
Shares jumped 14.4% to 33p on the news.
8.18am: FTSE 100 little changed as investors digest earnings
FTSE 100 made a subdued start to the day as investors digested a hefty batch of earnings and awaited the latest interest rate decision from the ECB with a rate hike of 75 basis points expected.
At 8.15am was up 2 points at 7,058 while the broader FTSE 250 was down 32 points at 18,074.
In London, Lloyds Banking Group PLC (LON:LLOY) fell after reporting below forecast Q3 pre-tax profits of £1.5bn and increased its bad debt provisions to £668mln for the quarter taking them above £1bn for the year to date.
On the bright side the high street lender raised its net interest margin guidance to 2.9% from 2.84% for the year to date.
Shares fell 3.4% on the profit shortfall.
Sophie Lund-Yates, Equity Analyst at Hargreaves Lansdown (LON:HRGV) said: “Lloyds has seen its profits wiped out as it puts almost £700mln aside in readiness for a weak economy.”
Shell PLC (LSE:SHEL, NYSE:SHEL) was another firm feature in the market with shares rising 2.33% after the oil major announced plans to increase the dividend in the fourth quarter to 15% as its third quarter results saw it continue to reap the rewards of higher global energy prices.
Shell reported third-quarter underlying earnings (EBITDA) of US$21.5bn, down 7% on the second quarter but up 59% on a year ago, with cash flow from operating activities of US$15.5bn and a US$5bn cash outflow from investing activities.
Unilever PLC (LON:ULVR) rose after it raised guidance for full-year sales after reporting a better-than-expected increase in third-quarter sales as it continued to hike prices to counter soaring costs.
The group announced underlying sales growth of 10.6% ahead of City expectations for growth of 8%.
Unilever said it now expects underlying sales growth for the full year 2022 to be above 8%.
In July, the company said it now expected to beat its previous forecast for full-year underlying sales growth of 4.5% to 6.5%.
Freetrade's senior analyst, Dan Lane said: “A much brighter picture from Unilever today but there’s still a while to go before inflationary pressures stop hitting the bottom line.”
But he added: “Even with a hike in sales growth It still looks like the firm will miss Jope’s 20% margin goal for the year, and will have to strap in for higher material costs in 2023.”
7.53am: Shell plans to raise dividend in quarter four
Shell PLC has kicked off a new US$4bn share buyback, announced a US$0.25 interim dividend, and said it intends to increase the dividend for the fourth quarter by 15%, as its third quarter results saw it continue to reap the rewards of higher global energy prices.
The buyback follows US$6bn of shareholder distributions in the third quarter, a period where the oil supermajor saw income attributable to shareholders fall by 63% from the previous quarter to US$6.7bn.
Shell reported third-quarter underlying earnings (EBITDA) of US$21.5bn, down 7% on the second quarter but up 59% on a year ago, with cash flow from operating activities of US$15.5bn and a US$5bn cash outflow from investing activities.
READ: Shell announces another US$4bn buyback and plans Q4 dividend increase
7.45am: Sterling tops out at six-week high against US dollar, euro reclaims parity
Cable topped out at a six-week high of US$1.163 this morning before plateauing throughout the Asia trading session.
The pair remains on a decent footing though, having benefitted from a softer US dollar over the past two days.
“Corrective forces are at work” as investors seek out riskier assets on the equities markets, reckons Chris Turner, head of FX strategy at ING.
The GBP/USD pair rises on soft US dollar
Sterling has stabilised against the euro in the lead up to today’s interest rate decision from the European Central Bank, with the EUR/GBP pair changing hands at 86.7p.
Another 75 bps hike from the ECB is generally expected, though a softer 50 bps hike wouldn’t be too shocking.
The big test for the euro is if it can maintain parity with the US dollar, having broken through the barrier during yesterday’s session.
At US$1.065, there is at least a bit of headroom to sustain the EUR/USD pair above parity should a lighter rate hike be announced, but one wonders if the psychological barrier will drive hawkish sentiment in today’s meeting.
The Bank of Canada turned a few heads after proving more dovish than expected- its 50 bps rate hike came below 75 bps expectations.
Despite a brief kneejerk reaction that saw the USD/CAD pair jump as high as US$1.365, the Loonie actually responded well to the surprise, and the pair drew back to US$1.355.
Kneejerk spike aside, the Canadian dollar reacted well to the BoC’s softer approach to rates
The BoC’s dovish action could be a sign of a global policy pivot.
7.40am: Unilever raises full year sales estimates
Unilever PLC increased its full-year sales estimates and reported a better-than-expected increase in third-quarter sales as it continued to hike prices to counter soaring costs.
The group, which sells Ben & Jerry's, Dove soap and Hellmann's, announced underlying sales growth of 10.6% ahead of City expectations for growth of 8%.
Unilever said it now expects underlying sales growth for the full year 2022 to be above 8%.
In July, the company said it now expected to beat its previous forecast for full-year underlying sales growth of 4.5% to 6.5%.
Chie executive, Alan Jope, said “We have delivered growth in each of our five business groups, led by a strong performance from our billion+ Euro brands, growing 14% in the quarter. Strong pricing allows us to continue to drive increased investment behind our brands.”
7.22am: Lloyds posts 13% jump in net income, lifts net interest margin guidance
Lloyds Banking Group PLC has reported third quarter net income of £4.59bn, up 13% and in line with market forecasts, but announced a jump in bad debt charges to £668mln taking the total for the nine months to date this financial year to £1.045bn.
Underlying profits before the impairment charges were £2.4bn, a 22% increase on the same period last year, while underlying profits were down 17% to £1.73bn.
The high street lender said its CET1 ratio of 15.0% remained well ahead of the ongoing target of c.12.5% and it remained committed to looking at returning excess capital returns as usual at year-end.
Looking ahead, the bank updated its 2022 guidance and said banking net interest margin are now expected to be greater than 290 basis points,compared to 284 basis points for the year so far, operating costs are expected to be c.£8.8 billion, the asset quality ratio is now expected to be c.30 basis points and return on tangible equity expected to be c.13%.
Charlie Nunn, group chief executive: “Our income growth, balance sheet momentum and resilient customer franchise have enabled the Group to deliver a robust financial performance and strong capital generation, alongside updated guidance for 2022.”
7.00am: FTSE seen lower, earnings and ECB rate move in focus
FTSE 100 set to open lower on Thursday after US markets lost their earlier gains and as Facebook (NASDAQ:META) owner Meta saw its shares tumble after the bell following weaker than expected third quarter earnings.
Spread betting companies are calling London’s blue chip index down by around 20 points.
US markets ended a volatile session in subdued fashion with the Dow Jones posting its fourth consecutive day of gains (just) but with tech stocks under pressure following disappointing results from Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT).
At the close the DJIA was up 3 points at 31,840, the S&P 500 was down 28 points, or 0.74%, at 3,831 and the Nasdaq Composite slipped 228 points, or 2.04%, to 10,971.
Back in Europe and attention will focus on the ECB’s interest rate decision with a 75bps increase expected.
The Bank of Canada surprised the market yesterday by hiking rates by a less than expected 50bps, with Bank of Canada governor Tiff Macklem going on to admit that the central bank was placing a lot more emphasis on the effects of the slowdown when crafting rate strategy going forward.
Michael Hewson chief market analyst at CMC Markets UK said: “This could have implications if the Federal Reserve were to start thinking the same way next week, hence the selloff in the US dollar.”
In London, a bumper corporate calendar sees results from Lloyds Banking Group PLC, Shell PLC and Unilever PLC amongst others.