London’s blue-chip FTSE 100 ended flat on Tuesday as mixed earnings and rising friction between the United States and China weighed, while a surge in budget airline easyJet on adding more flights lifted the mid-caps index.
Spirits maker Diageo Plc was the biggest drag on the FTSE 100 as coronavirus lockdowns saw it take a 1.3 billion pound writedown and report a bigger-than-expected decline in underlying net sales.
Oil major BP Plc , meanwhile, posted its best day in two months after unveiling earlier than expected a plan to reduce its oil and gas output by 40% and boost investments in renewable energy over the next decade.
Sino-U.S. tensions escalated following U.S. President Donald Trump’s move to force a sale of Chinese-owned video app TikTok’s U.S. operations. China will not accept the “theft” of its technology company and is able to respond to Washington’s move, the China Daily said.[MKTS/GLOB]
The FTSE 100 has struggled to build on a stimulus-led stock market rally with the world sliding into a deep recession and surging COVID-19 cases threatening even more lockdowns.
The focus this week is on a Bank of England meeting where it is expected to hold interest rates and shed more light on the pace of an expected domestic rebound.
“As the (BoE) wants to keep its powder dry for as long as possible, we don’t expect any bold statements or strong hints at additional easing,” said Stefan Koopman, senior market economist at Rabobank.
But a monetary policy response could be seen by November, Koopman said, given Brexit-related risks, a possible second wave of the virusand increasing unemployment.
The mid-cap FTSE 250 rose 0.9% as easyJet Plc jumped 8.8% on plans to fly at 40% of its capacity over the rest of the summer, while a first-half profit beat saw insurer Direct Line hit five-month highs.
But a 9.4% slump for Babcock following a plunge in quarterly profit, capped gains.
A surge in BP shares after it laid out plans to cut its oil and gas output and boost investments in renewable energy offset disappointing earnings reports including from spirits maker Diageo, although European stocks closed largely flat.
FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, August 3, 2020. REUTERS/Staff
After sliding as much as 0.6%, the pan-European STOXX 600 index recouped some of the losses in late afternoon trading to close 0.1% lower.
BP rose 6.5% even as it cut its dividend for the first time in a decade and recorded a $6.7 billion quarterly loss.
The broader oil & gas sector rose 2.5%, with other growth-linked cyclical sectors such as automakers and banks also rising.
By contrast, Johnnie Walker whisky maker Diageo’s shares slid 5.6% after it reported a bigger-than-expected decline in underlying sales in nearly all markets.
German drugs and pesticides group Bayer slipped 2.4% as moves to settle lawsuits over its Roundup weedkiller contributed to a 9.5 billion euro ($11.2 billion) loss.
Of the 223 companies listed on the STOXX 600 that have reported so far, nearly 62% have topped analysts’ much-reduced expectations for profits, according to Refinitiv data. In a typical quarter, 50% beat earnings estimate.
“Overall, the decline (in earnings) isn’t quite as large as people had feared. However, that is not feeding through into people upgrading their estimates for the rest of the year,” said Matt Siddle, portfolio manager, Fidelity Funds European Growth.
“The rate of how rapidly sales were recovering in June - because that was a much better guide for what will happen in the second half of the year - has not tended to give enough confidence to upgrade.”
After a recovery from March lows that has seen the STOXX 600 climb nearly 36%, markets have wobbled in recent weeks on concerns about a resurgence in coronavirus cases.
Doubts over the progress of a U.S. coronavirus aid package and a diplomatic tussle over Chinese tech companies’ operations in the United States also kept investors on edge.
Banking-heavy Italian and Spanish indexes were both higher, as data showed Italy standing out as the main beneficiary of the European Central Bank’s efforts to support a virus-stricken euro zone economy.
Intesa Sanpaolo, which just sealed a takeover of smaller rival UBI, gained 5.0% after saying it would seek clearance to return more cash to shareholders.