London's two big oil stocks were helping to prop up the FTSE 100 on Tuesday, as the wider market suffered from market worries about another possible flash-point for conflict between the US and China.
A provocative potential trip to Taiwan by US House Speaker Nancy Pelosi has added further strain to relations between the world's number one and number two economies.
On the central banking front, attention turns to the Bank of England and a possible 50 basis point rate hike, after the Reserve Bank of Australia lifted rates by the same increment.
The FTSE 100 was down 9.24 points, or 0.1%, at 7,404.18 midday Tuesday, outperforming peers after a strong update from BP.
The FTSE 250 index slid 221.59 points, or 1.1%, to 19,857.64. The AIM All-Share index was down 10.89 points, or 1.2%, at 907.74.
The Cboe UK 100 index was down 0.4% at 738.79. The Cboe 250 was down 1.3% at 17,303.45. The Cboe Small Companies was down 0.3% at 13,893.41.
In Paris, the CAC 40 stock index was down 0.9%, while in Frankfurt, the DAX 40 was 1.1% lower.
‘European shares followed the global trend, sliding lower, as investors brace for a new batch of major macro developments this week,’ ActivTrades analyst Pierre Veyret commented.
‘Thursday's BoE's decision and Friday's US [nonfarm payrolls] are among the events likely to keep markets significantly volatile this week. In addition, traders also have to deal with the prospect of rising US-China tensions over Taiwan, which adds to the current geopolitical uncertainty already brought by the war in Ukraine. However, despite all of these uncertain market drivers, today's price action can also be seen as a technical correction, with markets correcting and establishing a new floor level following the recent break-out of major resistances.’
The FTSE 100 had a bullish final week of July, rising 2.0%. It has started August with a bit more trepidation, however, losing 0.3% so far this week.
China said the US will ‘pay the price’ if House Speaker Pelosi visits Taiwan during her Asia trip. China considers Taiwan its territory and has repeatedly warned that it would view a Pelosi visit as a major provocation.
The dollar was mixed on Tuesday as the Federal Reserve comes into focus.
The pound faded to $1.2202 midday Tuesday in London from $1.2270 at the London equities close on Monday. The euro fell to $1.0227 from $1.0270. Versus the yen, the greenback fell to JP¥130.95 from JP¥131.85, though it was off an intraday low of JP¥130.43.
St Louis Fed President James Bullard, one of the US central bank's biggest hawks, speaks later on Tuesday, following Chicago Fed chief Charles Evans and Cleveland counterpart Loretta Mester.
Analysts at Dutch bank ING commented: ‘The switch to a meeting-by-meeting approach by the [Federal Open Market Committee] should increase the relevance of policy comments by members, and given we’ll hear from two hawks and one dove, the overall message today may support rate expectations and the dollar.’
Elsewhere on the central banking front, the Reserve Bank of Australia on Tuesday lifted interest rates by another 50 basis points as it tackles high inflation, and said further tightening is likely.
The RBA raised the cash rate by half a percentage point to 1.85%, as expected by markets, and also increased the interest rate on exchange settlement balances by 50 basis points to 1.75%.
The Bank of England gives its latest monetary policy decision on Thursday, and it is expected to lift rates by that same 50 percentage point increment, lifting UK bank rate to 1.75%.
In London, BP shares climbed 3.4% as the oil major pledged to step up returns. Shell rose 0.6% in a positive read-across, with the two oil majors helping the FTSE 100 to outperform continental peers.
BP lifted its quarterly dividend by 10% to 6.006 cents per share from 5.460 cents a year prior. The first-half payout is up 7.1% to 11.466 cents.
BP executed $2.3 billion worth of buybacks in the second quarter before completing the remainder of a $2.5 billion programme in late July.
What's more, BP plans to complete a $3.5 billion buyback before announcing third-quarter results, which are scheduled for November 1. It said it expects to be able to increase the dividend by 4% annually through 2025.
By its preferred metric, BP's replacement cost more than trebled to $7.65 billion in the second quarter of 2022 from $2.38 billion a year earlier. On an underlying basis, RC profit was $8.45 billion, up from $2.80 billion.
Total second-quarter revenue improved 85% to $69.51 billion from $37.60 billion.
London broker SP Angel noted that the five oil majors - Exxon, Chevron, Shell, BP and Total - collectively have announced $59 billion in second-quarter profit, up almost 100% on a year before, and have returned 45% of this to shareholders.
Fresnillo was the worst blue-chip performer, down 6.0%. The miner scaled back dividends for its half-year, as profit tumbled and gold production fell by nearly 30%.
In the first half of 2022, the Mexico City-based silver and gold miner said pretax profit from continuing operations plummeted by 65% year-on-year to $155.2 million from $445.4 million.
Total revenue fell 14% to $1.26 billion from $1.47 billion a year prior.
The firm declared an interim dividend of 3.40 cents, sharply lower than the payout of 9.90 cents the year before.
Biffa surged 11% as the waste management firm reported record profit after an ‘eventful’ year.
Adjusted operating profit surged to a record high of £96.6 million in the year to March 25, from £44.2 million the year prior.
Biffa's pretax loss narrowed to £28.6 million from £52.8 million. The statutory profit measures includes a £104 million hit from adjusting items, up from £82 million a year earlier.
One-off items this year included a £25 million impairment from its Company Shop buy and a £17 million provision for a probe related to UK landfill tax laws. Landfill tax is a levy imposed on a firm that disposes of materials in waste sites.
Biffa's revenue surged 39% to £1.44 billion from £1.04 billion.
It reinstated payouts during the year, declaring a final dividend of 4.69 pence. This takes Biffa's total dividend to 6.89p, a substantial increase from the last annual payout of 2.47p in financial 2020.
Synthomer tumbled 11%. The Essex-based chemicals maker said pretax profit in the first half of 2022 dropped 55% to £115.5 million from £254.4 million a year before.
Synthomer said demand for nitrile butadiene rubber weakened after it surged due to the pandemic. NBR is used in latex and surgical gloves.
International Consolidated Airlines fell 1.7%, On the Beach lost 4.3% and Tui gave back 3.3% following another reminder of airport disruption.
IAG's British Airways has reportedly suspended selling short-haul flights from Heathrow for at least a week.
The Times reported BA suspended ticket sales for domestic and European services until and including Monday to comply with Heathrow's cap on passenger numbers, with the airport announcing last month no more than 100,000 daily departing passengers are permitted until September 11.
Brent traded at $99.11 a barrel midday Tuesday, down from $100.70 late Monday. Gold rose to $1,774.85 an ounce from $1,766.01.
New York stock market futures were lower. The Dow Jones Industrial Average is called down 0.6%, with the S&P 500 down 0.9% and the Nasdaq Composite 1.0% lower.
On the US corporate earnings calendar, coffee house chain Starbucks, and chipmaker AMD both report second-quarter results.
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