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LONDON MARKET CLOSE: FTSE 100 returns early progress as BP disappoints

31st Oct 2023 16:59

(Alliance News) - London-listed blue-chips faded after a bright start with falls in oil majors, and index heavyweights, BP and Shell dragging the FTSE 100 lower.

Rolls-Royce motored as Barclays upgraded the stock to overweight, while retailers were lifted by an easing in shop price inflation ahead of the Bank of England's meeting this week.

The FTSE 100 index closed down 5.67 points, 0.1%, at 7,321.72. The FTSE 250 ended up 65.46 points, 0.4%, at 17,083.05, and the AIM All-Share closed up 1.28 points, 0.2%, at 679.85.

The Cboe UK 100 ended down 0.1% at 729.84, the Cboe UK 250 closed up 0.6% at 14,859.07, and the Cboe Small Companies ended down 0.4% at 12,594.08.

After the shock departure of its chief executive in September, oil major BP announced a further USD1.5 billion share buyback for the third quarter. But it wasn't enough to stop shares sliding 4.5% as its bottom line missed market forecasts.

Replacement cost profit fell to USD3.29 billion from USD8.15 billion on an underlying basis, which was behind company-compiled analyst consensus of USD4.01 billion.

However, the underlying RC profit rose from USD2.59 billion in the second quarter, which BP credits to "higher realized refining margins, lower level of refining turnaround activity, a very strong oil trading result, higher oil and gas production, partly offset by a weak gas marketing and trading result".

Total revenue and other income fell to USD54.02 billion from USD57.81 billion a year before, but rose from USD49.48 billion in the second quarter.

In the year as a whole, BP expects reported and underlying upstream production to be higher compared with 2022.

The fall at BP, combined with a declining oil price, saw industry rival Shell slip 1.9% as well.

Brent oil was quoted at USD86.09 a barrel at the London equities close on Tuesday, down from USD88.31 late Monday.

Elsewhere in the FTSE 100, telecoms firm Vodafone and fellow London listing Zegona Communications confirmed a EUR5 billion deal for the sale of the former's Spanish operations.

The consideration Zegona will pay is "at least" EUR4.1 billion in cash, and a further EUR900 million in redeemable preference shares.

"The sale of Vodafone Spain is a key step in right-sizing our portfolio for growth and will enable us to focus our resources in markets with sustainable structures and sufficient local scale," said Vodafone CEO Margherita Della Valle.

Zegona said in September that the two parties were in talks. Market reaction was subdued with Vodafone down 1.4%, while Zegona's shares remained suspended from trading.

Ahead of the Bank of England's interest rate decision on Thursday, there was good news on pricing pressures. UK shop price inflation eased for the fifth consecutive month to its lowest rate since last August. Prices were 5.2% higher in October than a year earlier, down from September's 6.2%, according to the British Retail Consortium-Nielsen shop price index.

Food inflation also slowed, to 8.8% from September's 9.9% – its sixth consecutive deceleration and lowest rate since last July – while fresh food inflation slowed even further to 8.3%, down from 9.6% a month earlier.

The news gave retailers a lift. Kingfisher rose 2.6%, Primark owner AB Foods rose 1.9% while B&M European Value Retail advanced 1.5%.

Rolls-Royce was the best performing stock in the FTSE 100, surging 6.4% after analysts at Barclays upgraded the engineering firm to 'overweight' from neutral.

The broker said the 10% fall in the share price in the past month presents a buying opportunity ahead of the November Capital Markets Day.

At the CMD, Barclays expects to learn the output of the strategic review, including quantifiable details around commercial optimisation costs and benefits, and what it termed the "all-important new medium-term targets".

But Intercontinental Hotels Group attracted a downgrade from JPMorgan, sending shares 2.7% lower.

The investment bank moved IHG to 'underweight' from 'neutral' and cut its price target by 14% to 5,400 pence from 6,300 pence.

JPM sees the risk-reward at IHG as "highly unappealing," with a bear/bull case suggesting close to around 20% downside.

In the FTSE 250, Spectris added 3.3% after saying it expects its full-year profit to be at the top end of expectations.

The London-based supplier of high-tech instruments, test equipment and software for industrial applications said sales in the three-month period ended September 30 grew 5.0% to GBP349.2 million from GBP332.6 million a year prior. Reported sales growth in the corresponding quarter a year ago was 13%.

On AIM, Sopheon soared 83% after reporting that it had received a bid approach that could be worth 1,000 pence per share, valuing the company at GBP114 million.

The firm said talks with Wellspring were "well advanced," and that should the bid be forthcoming it would recommend that shareholders accept.

Controlled by Resurgens Technology, Wellspring specialises in software for managing technology transfer, intellectual property and innovation activities, primarily for the academic, government and corporate markets.

The pound was quoted at USD1.2128 at the London equities close on Tuesday in London, lower compared to USD1.2144 on Monday. The euro stood at USD1.0562, down against USD1.0607. Against the yen, the dollar was trading at JPY151.63, higher compared to JPY149.13.

The Bank of Japan announced a minor tweak to its unconventional policy of controlling government bond yields on Tuesday, stopping short of expectations and sending the yen lower.

While most other major central banks have hiked interest rates in a bid to tame prices, the BoJ has stuck with sub-zero borrowing costs to support the world's number three economy.

In European equities, the CAC 40 in Paris ended 0.9% higher, while the DAX 40 in Frankfurt closed up 0.6%.

The eurozone's economy saw a slight quarterly contraction in the three months to September, whilst inflation slowed in October, according to Eurostat.

According to Eurostat, quarter-on-quarter, gross domestic product fell by 0.1%, having risen by 0.1% in the second quarter. This was worse than expected, with markets expecting GDP to have stagnated.

The flash eurozone harmonised index of consumer prices rose by 2.9% annually in October, slowing from a 4.3% increase in September. The print was expected to show a 3.1% rise in the period.

Month-on-month, the figure rose by 0.1%, cooling from a 0.3% increase in September.

Gold was quoted at USD1,989.19 an ounce, down against USD2,000.32.

Stocks in New York were muted at the time of the London close as the two-day Federal Reserve meeting began. The CME FedWatch tool puts a 98% probability that interest rates will be left unchanged.

The Dow Jones Industrial Average was flat, the S&P 500 index was up 0.1%, and the Nasdaq Composite was down 0.1%.

In Wednesday's UK corporate calendar, pharmaceutical firm GSK reports third quarter results and retailer Next and mining technology firm Weir release trading updates.

Wednesday's global economic calendar sees the US interest rate decision at 1800 GMT. Before that, there are a host of manufacturing purchasing managers' index readings, including from China and Japan overnight, and the UK at 0930 GMT.

By Jeremy Cutler, Alliance News reporter

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