15th Jun 2020 07:58
(Alliance News) - Oil major BP on Monday said it will take charges of up to USD17.5 billion in the second quarter, as it copes with weak demand and lower prices due to the Covid-19 crisis and prepares for a global economic recovery that is less energy-intensive.
BP said it sees the prospect of the pandemic having an enduring impact on the global economy, with the potential for weaker demand for energy for a "sustained period".
Further, BP believes there are growing expectations that the aftermath of the pandemic will accelerate the pace of transition to a lower-carbon economy and energy system, as countries seek to "build back better" so that their economies will be more resilient in the future.
The energy company has revised its long-term price assumptions, lowering them and extending the period covered to 2050 so that it is now consistent with its long-term target of becoming a net zero company by 2050.
BP said this will lead to non-cash impairment charges and write-offs in the second quarter of 2020, estimated to be in an aggregate range of USD13 billion to USD17.5 billion post-tax.
In addition, BP has revised investment appraisal long-term price assumptions which are now an average of around USD55 a barrel for Brent from 2021 to 2050.
"We have reset our price outlook to reflect that impact and the likelihood of greater efforts to 'build back better' towards a Paris-consistent world. We are also reviewing our development plans. All that will result in a significant charge in our upcoming results, but I am confident that these difficult decisions - rooted in our net-zero ambition and reaffirmed by the pandemic - will better enable us to compete through the energy transition," BP Chief Executive Bernard Looney said.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 2.6% at 5,945.40
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Hang Seng: down 2.2% at 23,763.50
Nikkei 225: closed down 3.5% at 21,530.95
DJIA: closed up 477.37 points, 1.9%, at 25,605.54
S&P 500: closed up 1.3% at 3,041.31
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GBP: down at USD1.2460 (USD1.2527)
EUR: unchanged at USD1.1238 (USD1.1235)
Gold: up at USD1,720.01 per ounce (USD1,704.02)
Oil (Brent): down at USD37.35 a barrel (USD38.54)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
1100 BST Ireland goods exports and imports
1100 CEST EU foreign trade
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Thousands of non-essential shops across England are reopening their doors to customers for the first time in almost three months in the latest easing of the coronavirus lockdown rules, PA reports. Zoos and safari parks are also welcoming back visitors, places of worship can open for private prayer while some secondary school pupils will begin returning to their classrooms. At the same time passengers on public transport will be required to wear face coverings as the pace of activity begins to pick up. Chancellor of the Exchequer Rishi Sunak – who is reported to be considering a value-added tax cut to stimulate spending – acknowledged further redundancies were inevitable as the UK government's furlough scheme begins to unwind. Ministers are under intense pressure from Conservative members of Parliament to go further by the easing the two-metre social-distancing so the hard pressed hospitality sector can also reopen. Prime Minister Boris Johnson confirmed at the weekend that he had ordered a "comprehensive" Downing Street review of the regulation.
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Footfall across UK retail destinations remained largely absent in May, though the decline in customers slowed a little from April, as more stores were allowed to re-open. Footfall dropped 82% annually in May, recovering somewhat from April's record decline of 85%, according to the British Retail Consortium-Shoppertrak monitor. Shopping centres were still the worst hit. Footfall there slumped 85%. The BRC noted that the enclosed space of shopping centres makes social distancing even more challenging. High streets registered a 78% annual fall, performing better than shopping centres partly due to a rise in popularity of convenience stores. Finally, in retail parks the decline was a more-modest 55%, "thanks to wider open spaces in comparison to other locations and a higher proportion of supermarkets", BRC explained.
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House prices in England rose as the market reopened in June, with some 175,000 sellers springing "back into action" following the lockdown. According to listings site Rightmove, the average asking price in England during June was GBP337,884, up 1.9% from March. The June figure represented a 2.9% annual rise. In May, Rightmove said the number of new properties coming to market in the UK was down 90% annually, meaning it was unable to publish its usual monthly average selling price index. "Over 175,000 missing sellers couldn't come to market from March 24 to May 12, but they've sprung into action with record number of owners asking for valuations and daily new listings now up on last year," Rightmove said.
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The final Programme for Government is expected to be signed off on Monday as Irish government formation talks concluded on Sunday night. The leaders of Fianna Fail, Fine Gael and the Green Party will meet on Monday after failing to sign off on the programme following hours of discussions on Sunday. Leaving Government Buildings on Sunday night, Fianna Fail leader Micheal Martin said he was confident the final Programme for Government document would be fully signed off by then.
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BROKER RATING CHANGES
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CREDIT SUISSE CUTS DIAGEO TO 'NEUTRAL' (OUTPERFORM) - PRICE TARGET 2900 (3450) PENCE
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ODDO BHF CUTS TUI TO 'REDUCE' (NEUTRAL)
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COMPANIES - FTSE 100
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Distribution and services firm Bunzl said its "resilient business model" is expected to deliver a strong performance in the half-year period to June 30, against the background of challenging trading conditions due to the Covid-19 pandemic. Bunzl said interim revenue is expected to increase by around 6% at both actual and constant exchange rates. In addition, Bunzl's overall operating margin is expected to be modestly higher than the comparable period last year, due to a change in the mix of products sold during the period, including a higher proportion of imported own-brand products. Bunzl said there has been no significant change in its financial position during the first half and continues to have substantial funding headroom available, with strong cashflow and a robust balance sheet. However, it is cautious on its second-half outlook due to the coronavirus pandemic and its effect on trading conditions.
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Consumer goods firm Unilever said it will invest EUR1 billion in a new Climate & Nature Fund. The Dove soap maker said that the money will be used over the next 10 years to fund projects that restore landscapes, reduce carbon emissions, or reforest and reinstate wildlife habitats. Unilever also committed to net zero emissions from all of its products by 2039 - from the sourcing of materials up to the point of sale of products.
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Pharmaceutical firm AstraZeneca has struck a deal with Europe's Inclusive Vaccines Alliance to supply up to 400 million doses of an experimental Covid-19 vaccine, as efforts to boost manufacturing capacity continue at pace. The alliance, which was forged by Germany, France, Italy and the Netherlands to speed up production of a vaccine, is set to take delivery of the material being tested by the University of Oxford by the end of 2020. The agreement with AstraZeneca also aims to make the vaccine available to other European countries wishing to take part. The cost is expected to be offset by funding from the governments involved.
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ViiV Healthcare said the US Food & Drug Administration has approved Tivicay PD tablets, an HIV drug, for oral suspension. ViiV is a specialist human immunodeficiency virus company, majority-owned by GlaxoSmithKline PLC, with Pfizer Inc and Shionogi Ltd as shareholders. Tivicay PD tablets are used in combination with other antiretroviral agents for the treatment of HIV type 1 infection in paediatric patients aged at least four weeks and weighing at least 3 kilograms, as well as an extended indication to expand the use of the already approved Tivicay tablet in paediatric HIV patients weighing 20 kilograms and above. The FDA approval is based on data from the ongoing P1093 and Odyssey studies.
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COMPANIES - FTSE 250
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Cineworld Group late Friday said it has terminated its takeover of Canada's Cineplex. Cineworld said the CAD2.8 billion, about GBP1.6 billion, was dropped after "certain breaches" of the acquisition deal. The takeover would have created North America's largest chain of movie theatres to better compete with AMC Entertainment. It would have added 165 cinemas to Cineworld's existing 786 sites and 9,500 screens. AMC Entertainment owns or operates about 1,000 theatres around the world. But the coronavirus pandemic has closed theatres for months and the continued appeal of cinemas is in doubt as major media companies are investing heavily in streaming services. Cineplex has a 75% box office market share in Canada. Cineworld did not outline the specifics of what parts of the transaction it believes Cineplex ran afoul of, but the London-based company noted that Cineplex has denied any such breaches.
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COMPANIES - MAIN MARKET AND AIM
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Metro Bank confirmed a press report over the weekend that it is in talks to acquire peer-to-peer lender RateSetter, but said discussions regarding the potential acquisition are at an early stage. Sky News had reported that people familiar with the deal said there was no guarantee the talks would result in a deal, and it was unclear what price Metro Bank was offering for RateSetter. "There can be no certainty at this stage that a formal agreement will be reached, nor as to the terms of any agreement. A further announcement will be made if and when appropriate," Metro Bank said on Monday.
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Monday's Shareholder Meetings
IQ-AI
Mirriad Advertising
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By Tom Waite; [email protected]
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