31st Oct 2019 08:37
(Alliance News) - The FTSE 100 started Thursday's session on the back foot thanks for share price declines from Royal Dutch Shell and Lloyds Banking in the wake of their third-quarter results.
The FTSE 100 index was 15.7 points lower, or 0.2%, at 7,315.03 early Thursday. The FTSE 250 was up 19.96 points, or 0.1%, at 20,135.06, and the AIM All-Share was up 0.1% at 890.85.
The Cboe UK 100 index was down 0.2% at 12,415.01. The Cboe UK 250 was down 0.1% at 18,068.18 and the Cboe UK Small Companies was flat at 11,226.61.
In European equities, the CAC 40 index in Paris was flat and the DAX 30 in Frankfurt up 0.1% in early trade.
At the bottom of the FTSE 100 was Royal Dutch Shell after the oil major warned it may not be able to reduce debt as planned and keep on with its share buyback programme.
Shell 'A' shares were down 3.2% and 'B' shares down 3.0%.
Shell - the largest London-listed company by market capitalisation - is looking to reduce gearing to 25% by 2020. At the end of September, it stood at 27.9%, higher than the 27.6% at the end of June and 23.1% a year before.
The oil major, London's largest listed company, has kept the dividend for the third quarter at 47 US cents, the same as the prior quarter, and also announced a new USD2.75 billion buyback, as it looks to return USD25 billion to shareholders.
Chief Executive Ben van Beurden commented: "Our intention to buy back USD25 billion in shares and reduce net debt remains unchanged.
"The prevailing weak macroeconomic conditions and challenging outlook inevitably create uncertainty about the pace of reducing gearing to 25% and completing the share buyback programme within the 2020 timeframe."
Shell's CCS earnings, its preferred profit metric, excluding items was USD4.92 billion for the third quarter, 15% lower year-on-year.
Lloyds Banking traded 2.5% lower after revealing a third quarter PPI hit.
Net interest income for the three months to September 20 was down 2% to GBP3.13 billion, with net income down 6% to GBP4.19 billion.
The lender's pretax profit sank to just GBP50 million from GBP1.82 billion a year ago as it took a GBP1.80 billion provision for PPI claims in the quarter, with no such charge booked in the prior period.
This PPI provision was "driven by an unprecedented level of PPI information requests received in August", said Chief Executive Antonio Horta-Osorio.
Richard Hunter, head of markets at Interactive Investor, said Lloyds has "brought the curtain down" on a largely "forgettable" set of third-quarter banking earnings.
"The booked GBP1.8 billion charge for PPI is at the very top end of the previously guided range and all but wipes out the quarter's profit. Elsewhere, the themes are broadly similar to those reported by its competitors. There is continued pressure on Net Interest Income, largely due to the current interest rate environment, impairments have risen by 31% and the capital cushion has also declined slightly," said Hunter.
IAG was 1.4% lower after reporting growth in third-quarter revenue but also that profit took a hit from British Airways strike action.
Revenue for the three months to September 30 was EUR7.31 billion, up 2.4% from EUR7.14 billion a year ago. Pretax profit, however, slipped 9% to EUR1.26 billion from EUR1.38 billion.
Results in the third quarter were hit by cancellations relating to industrial action by BALPA pilots and by other disruption, said IAG, causing a hit to profit of EUR155 million.
Passenger unit revenue for the quarter was down 0.5%, and down 1.1% at constant currency. Non-fuel unit costs before exceptional items for the quarter were up 0.5%, and 1.% higher at constant currency on a pro forma basis.
Meanwhile, London-listed miners declined following weak Chinese manufacturing data.
Glencore was down 1.1% in early trade, with Antofagasta also 1.1% lower and Anglo American down 1.0%.
Chinese factory activity contracted for a sixth-straight month in October, data showed, as the key manufacturing sector suffers under the weight of a slowing domestic economy and the long-running US trade war.
The figures are the latest to highlight a slowdown in the world's number two economy, which in the third quarter expanded at its slowest rate for nearly three decades.
The closely watched Purchasing Managers' Index, a key gauge of activity in the country's factories, fell to 49.3 last month, the National Bureau of Statistics said. This was well short of forecasts of 49.8 and also down from September's figure of the same amount. China's official PMI has fallen below the 50 mark that separates growth and contraction every month since April.
"October's official survey data suggest that the economy is still deteriorating and the authorities will soon have to admit that. As such, we continue to expect at least a 10bp cut to the rate corridor before the end of the year and another phased lowering of the RRR," commented Freya Beamish, chief Asia economist at Pantheon Macroeconomics.
In Asia on Thursday, the Japanese Nikkei 225 index closed up 0.4%. In China, the Shanghai Composite ended down 0.4%, while the Hang Seng index in Hong Kong closed 0.7% higher.
In the economic calendar on Thursday, eurozone GDP, CPI and unemployment rate data all are at 1000 GMT. In the US, jobless claims figures are printed at 1230 GMT ahead of the Chicago PMI at 1345 GMT.
By Lucy Heming; [email protected]
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