London’s FTSE 100 fell on Tuesday, underperforming European peers, held back by some underwhelming earnings, with Diageo particularly badly hit.
The FTSE 100 index traded down 42.60 points, or 0.5%, at 8,249.75 on Tuesday morning. But the FTSE 250 rose 130.10 points, 0.6%, at 21,382.17, while the AIM All-Share fell 0.54 of a point, 0.1%, at 776.78.
The Cboe UK 100 was down 0.6% at 823.55, the Cboe UK 250 added 0.8% to 18,713.98, and the Cboe Small Companies rose 0.2% to 17,373.79.
The CAC 40 in Paris rose 0.3%, while Frankfurt’s DAX 40 traded 0.4% higher.
The nervy start for the FTSE 100 followed largely weaker trade in Asia, and a flattish finish in New York.
In China on Tuesday, the Shanghai Composite ended down 0.4%, while the Hang Seng was 1.5% lower. In Tokyo, the Nikkei 225 ended up 0.2%, while the S&P/ASX 200 in Sydney lost 0.5%.
In New York on Monday, the Dow Jones Industrial Average lost 0.1%, but both the S&P 500 and Nasdaq Composite edged up 0.1%.
The pound was quoted at $1.2851 early Tuesday, nudging up to $1.2847 at the time of the London equities close on Monday. The euro stood at $1.0818, flat from $1.0819. Against the yen, the dollar was trading at JP¥154.92, up from JP¥153.91.
‘The big question for FX markets is whether July’s sharp correction is over. We think events tomorrow (Bank of Japan and Fed meetings) will have a big say. Before then, US [job openings and labour turnover survey] and consumer confidence data today should add to the case that the US economy is slowing. And in Europe, we’ll see second-quarter GDP releases and insights into the July CPI data,’ ING analysts commented.
The US releases are due at 1500 BST. Before then, there is a eurozone gross domestic product reading at 1000 BST, before German inflation data at 1300 BST.
On Wednesday, the Bank of Japan and US Federal Reserve announce interest rate decisions. The Bank of England follows on Thursday.
On the corporate front, Microsoft will be in the spotlight later. It reports after the closing bell in New York, seeking to undo some of the damage to investor sentiment done by some poorly-received tech earnings last week.
In London, reports from BP and Standard Chartered impressed, though Diageo less so.
StanChart upped its outlook, announced a new share buyback and reported earnings growth for the second-quarter.
The Asia-focused lender said reported operating income in the second-quarter of the year rose 2.1% to $4.66 billion from $4.57 billion a year prior, despite net interest income declining 19%. Non interest income rose 18%. Pretax profit climbed 4.2% to $1.58 billion from $1.52 billion a year prior.
StanChart upped its interim dividend by 50% to 9 cents per share and it announced a further $1.5 billion share buyback which starts ‘imminently’.
CEO Bill Winters said: ‘We produced a strong set of results for the first half of the year, demonstrating the value of our franchise as a cross-border corporate and investment bank and a leading wealth manager for affluent clients. We generated double-digit income growth, with positive momentum continuing into the second quarter, and with continued discipline in managing our expenses.’
The CEO added: ‘We are announcing our largest ever share buyback of $1.5 billion. This brings our total shareholder distributions announced since full-year 2023 results to $2.7 billion.’
StanChart now expects operating income to rise more than 7% at constant currency in 2024, having previously expected a rise at the top end of a 5% to 7% range.
StanChart shares rose 5.8%.
BP added 2.7%. BP reported a decline in second-quarter revenue and a fall in pretax profit and it announced plans for another $1.75 billion share buyback. It reported an increase in underlying profit, however, shaking off ‘lower industry refining margins’.
BP said its second-quarter total revenue $48.25 billion, a decline of 2.5% from $49.48 billion. Pretax profit fell 64% to $1.25 billion from $3.49 billion. Profit increased by a key gauge increased, however. Underlying replacement cost profit rose 6.5% to $2.76 billion. BP’s underlying RC profit beat a Reuters cited analyst forecast of $2.54 billion.
BP upped its dividend 10% to 8.00 cents per share from 7.27 cents.
BP expects to buyback $1.75 billion worth of shares before its third-quarter results and is ‘committed to announcing $3.5 billion for the second half of 2024’.
‘BP’s second-quarter results come as the company seeks to rebuild investor confidence in its strategy and facing headwinds as it pauses renewable projects to cut costs and maintain share buybacks in an effort to and boost returns. BP maintains its expectation of slightly higher upstream production compared to 2023, with growth in oil production and operations offsetting lower output from gas and low carbon energy,’ Edison analyst Andrew Keen commented.
‘As BP deals with weak refining margins and lower oil trading results, it seems BP’s main focus will remain on improving their upstream production. Moving forward, it will be interesting to see how BP’s focus, which seems to be moving increasingly towards reducing costs and focusing increasingly on oil and gas investments and away from renewables impacts its long-term performance and perception by the investment and wider community.’
Diageo slumped 9.7%. Sales in the year to June 30 fell 1.3% from $27.89 billion from $28.27 billion. Pretax profit fell 3.3% to $5.46 billion from $5.64 billion.
‘While fiscal 24 was a challenging year for both our industry and Diageo with continued macroeconomic and geopolitical volatility, we focused on taking the actions needed to ensure Diageo is well-positioned for growth as the consumer environment improves,’ CEO Debra Crew said.
‘Fiscal 24 was impacted by materially weaker performance in [Latin America & Caribbean]. Excluding LAC, organic net sales grew 1.8%, driven by resilient growth in our Africa, Asia Pacific and Europe regions. This offset the decline in North America, which was attributable to a cautious consumer environment and the impact of lapping inventory replenishment in the prior year.’
In the new financial year, Diageo said the ‘consumer environment continues to be challenging’.
Shares in the company are down some 30% over the past year, having slumped 12% in a single trading day alone back in November, following a drab update. Save for a slight fightback around late-January to the end of February, which saw the stock rise some 10%, it has steadily declined since November.
Elsewhere, enterprise software firm Sage, chemicals maker Croda and medical technology company ConvaTec all failed to impress. The trio were down 6.0%, 4.9% and 4.3%.
St James’s Place led the way in the FTSE 250, surging 18%, as it hailed a ‘robust business performance for the first half of 2024’.
‘We have seen high levels of activity and engagement between our advisers and our clients, contributing to positive flows. Helped by strong investment returns for our clients, we have achieved record funds under management, delivered a good outturn for the Cash result, and grown the Partnership and our client base. It’s evident that we remain in good shape,’ CEO Mark FitzPatrick said.
Funds under management spiked to a record high of £181.9 billion at June 30, rising 8.1% from £168.2 billion in December.
Fee and commission income over the six months rose 19% to £1.60 billion from £1.35 billion a year prior. Investment returns spiked to £14.16 billion from £6.63 billion. Pretax profit rose 50% to £577.0 million from £385.0 million.
In addition, the firm predicted total net savings of ‘approaching £500 million through to 2030’.
It explained: ‘We have an ambition to reduce our addressable cost base by around £100 million per annum before tax. We will have completed the work to achieve these cost savings by the end of 2026, with one-off costs to achieve of approximately £80 million. This means that up to 2030, we estimate cumulative savings, net of costs to achieve, of approaching £500 million. In creating this significant capacity, we have the opportunity to fund investment in a disciplined manner. This investment will enable us to deliver on our strategic initiatives, further underpin our long-term growth ambitions, and improve the cash result.’
Elsewhere in London, Jersey Oil & Gas lost 14%, as it noted changes to the UK energy profits levy announced Monday.
The levy, currently set at a rate of 35%, is to rise to 38% from the start of November. It will bring the headline rate of tax on upstream oil and gas activities to 78%.
‘The Greater Buchan Area joint venture will carefully consider the impact of the tax changes to the economics of the development and project sanction. The full implications will, however, only be clear when the level of capital allowance claims available as deductions to the EPL are provided in the October budget,’ Jersey Oil said.
The AIM listing owns a 20% non-operated interest in the Greater Buchan Area. Serica Energy, the owner of a 30% stake, traded 3.8% lower.
Brent oil was quoted at $78.89 a barrel early Tuesday, fading from $79.80 at the time of the London equities close Monday. Gold rose to $2,389.87 an ounce from $2,377.22.
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