BP’s latest $1.25 billion share buyback failed to keep the FTSE 100 index on the front foot, despite Wall Street markets setting fresh records last night.
Weaker commodity and financial stocks were to blame as the top flight fell back from the 20-month high seen yesterday. The S&P 500 finished at another all-time high on Monday, with electric car maker Tesla now worth $1.2 trillion after its shares surged 8%.
The focus in London has been on oil giant BP after chief executive Bernard Looney unveiled more buybacks and better-than-expected third quarter profits of $3.3 billion, aided by higher commodity prices.
FTSE 100 Live Tuesday
Mining stocks send FTSE 100 lower
Tesla worth $1.2 trillion after 8% shares surge
THG shares under more pressure
FTSE closes lower
18:17 , Oscar Williams-Grut
The FTSE 100 has closed down 14 points at 7274. Standard Chartered, down 7.8%, was the biggest faller of the day despite posting a 44% leap in profits to more than $1 billion. Today’s figures were better than expected but it still forecast flat revenues for the full year. There is scepticism of the bank’s wider strategy. Like HSBC it is betting heavily on China.
Shortly behind is Paddy Power-owner Flutter Entertainment, which has sunk 7.7% after lowering full-year guidance. BP fell 3.3% despite beating forecasts on underlying earnings. An accounting treatment that pushed the oil giant to a statutory loss may have spooked investors.
Danni Hewson, AJ Bell financial analyst, says: “London markets seem to have left the party early with all indices failing to make gains. Miners and BP have kept the FTSE 100 in the doldrums, the former responding to commodity prices and the latter failing to delight investors who question how long revenues can be buoyed up by the current climate.
“And updates from Standard Chartered and Flutter were met with disappointment as both, for different reasons, delivered disappointing outlooks. And it is all about outlook with so much uncertainty about how the next six months will play out.
“One bright spot on the FTSE 100 was delivered by AstraZeneca, helped by a triple whammy with investors thinking about their future strategy, a deal to supply more jabs to Vietnam and a nice warm glow courtesy of its big rival over on Wall Street.
“Pfizer delivered a barnstorming performance with its latest earnings report, beating expectations and raising its forecast. Other US vaccine makers got a similar lift to their share price as booster programmes pick up pace.”
That’s all from us on the blog today. Join us again tomorrow.
Australia sets tone for central banks
07:37 , Graeme Evans
A big week for central bank meetings has got underway with the Reserve Bank of Australia (RBA) announcing the tightening of monetary policy.
It has scrapped its pandemic policy of yield curve control, where the yield on three-year bonds is kept at 0.1%. The bank's governor Philip Lowe said the move reflected an improvement in the country's economy and earlier than expected progress towards its inflation target.
A first rate rise could now come in 2023 rather than 2024, but Lowe signalled that market expectations for hikes as early as next year were an overreaction to recent inflation data.
The RBA's announcement comes in a big week for financial markets, with the US Federal Reserve tomorrow due to outline the timetable for tapering its $120 billion bond purchase scheme.
This will be followed by the Bank of England on Thursday, where markets have priced in an increase in the base rate from 0.1% to 0.25% in reaction to the inflation threat.
In the past few weeks, the central banks of Norway and New Zealand have raised rates and the Bank of Canada has ended its asset purchase programme.
The tighter outlook for monetary policy hasn't stalled momentum for stock markets, given that the era of cheap money is set to continue for some time yet. The run of strong quarterly earnings updates has helped, with Wall Street advancing to fresh records and the FTSE 100 index trading above 7,300 for the first time in 20 months during trading yesterday.
CMC Markets is predicting a flat opening for European markets, with the FTSE 100 index set to be unchanged at 7288.
Global dealmaking slows
07:55 , Graeme Evans
Merger and acquisition (M&A) activity has come off the boil after Refinitiv reported $330.7 billion (£241.9 billion) worth of global deals last month, 35% less than the previous month.
The figure brings an end to a run of three consecutive months during which the value of M&A exceeded US$500 billion (£365 billion).
Despite the fall in monthly M&A, the value of deals announced so far this year remains at an all-time year-to-date high of $4.7 trillion (£3.43 trillion), increasing 72% from the value recorded during the first ten months of last year.
Tech deals now account for 20% of global M&A by value so far this year, which is the highest on record after 734 deals worth a combined $55.6 billion (£40.7 billion).
Dow reaches 36,000 target two decades late
08:27 , Graeme Evans
The Dow Jones Industrial Average crossed the 36,000 mark in trading for the first time yesterday, two decades later than predicted in the 1999 book “Dow 36,000”.
Published during the dot com bubble, the book predicted the Dow would more than triple over the following three-to-five years to reach the 36,000 level.
The heady optimism seen in those days soured within a year, with the half way mark of 18,000 not reached until late 2014.
Last night, the Dow closed just below the threshold after rising 0.3%, while the S&P 500 finished at a record after being lifted by the latest Tesla share price rally.
TP ICAP sees energy trading arm jump
08:34 , Simon English
CITY trading house TP ICAP today reported a jump in revenues, especially at its energy and commodities arm which boomed on the back of the wider power crisis.
For households soaring energy prices are likely to be a problem this Christmas. For energy traders they could be a source of bonuses, as clients seek to hedge against moves in oil, gas and other commodities.
CEO Nicolas Breteau says the third quarter saw “increased volatility” and “higher secondary trading volumes”, that’s trading on trading, in effect.
“This resulted in revenue growth across all our divisions with particular strength in energy & commodities,” he added .
BP unveils $1 billion buyback plan
08:37 , Graeme Evans
The impact of high oil prices means BP expects to hand $1 billion (£731 million) back to investors every quarter for the foreseeable future.
The oil and gas giant will spend $1.25 billion (£914 million) over the next few months with more to come in the following quarters as long as oil at least $60 a barrel. Brent is currently trading at $84.45, with many analysts forecasting $100 in the coming months.
The share buyback plan was unveiled alongside a third quarter replacement cost profit - BP’s preferred measure of performance - 17% higher to $3.3 billion (£2.4 billion).
The company's strong cash generation has also led to sharp reduction in debt, although investors were underwhelmed by the latest update as shares fell 1%.
Mining weakness slows FTSE 100
08:48 , Graeme Evans
Weaker mining stocks have contributed to a weak session for the FTSE 100 index, with the top flight 0.5% lower at 7252.08. It had been at a 20-month high yesterday.
Anglo American and BHP shares were 3% lower and BP fell 1% despite another big share buyback alongside better-than-expected third quarter results.
Paddy Power owner Flutter Entertainment slid 7% after quarterly revenues growth of 9% came in short of some City estimates, despite strong trading in the US sports betting market.
The FTSE 250 index was 36.99 points lower at 23,174.23, with Virgin Money among the stocks under pressure after falling 4%.
COP26: Banks need to go green together
10:28 , Simon English
And kerplunk, here comes a big report from a big bank on the urgent methods it already has in place to save the planet.
These platitudes are across 300 (recycled) pages – who can say they aren’t taking this completely seriously?
More selling hits THG shares
10:35 , Graeme Evans
The City heaped even more pressure on Hut Group tycoon Matt Moulding today as THG shares crashed another 7% to continue a dramatic reversal of fortunes.
The latest slide came amid speculation that funds managed by BlackRock have offloaded a chunk of shares, adding to the weakening sentiment triggered by corporate governance concerns and the debate over the worth of the Ingenuity e-commerce platform.
Shares in THG, which is run and majority owned by co-founder Moulding, peaked at nearly 800p this year only to fall below 200p today before settling 15.6p cheaper at 201.8p.
THG isn't the only tech stock suffering a backlash from investors, however, with enthusiasm towards FTSE 100 newcomer Darktrace also on the wane in recent sessions.
Speculation that the cyber security firm's initial backers will use the end of their six month lock-up period to realise profits sent shares down by as much as 15% yesterday.
They fell another 1% or 6.9p to 674.6p, which compares with 957p last month. Peel Hunt said today it stood by last week's “sell” recommendation and 473p price target, having argued there was a disconnect between the valuation and revenue opportunity.
The FTSE 100 index endured a weaker-than-expected session after falling by 41.21 points to 7247.41. Weaker mining stocks were to blame after a significant fall in the price of coal futures amid signs that China is getting to grips with its recent power shortages.
Shares in BHP, Glencore and Anglo American were all down by 3% or more, while oil giant BP fell 2% despite strong third quarter results and accompanying buyback plans.
It was a better session for housebuilders after being dumped yesterday on fears over how higher mortgage rates may impact demand. Taylor Wimpey led the risers board with a gain of 2.3p to 152.9p, while Barratt Developments recouped about half of last night's 3% fall.
The FTSE 250 index was down 52.08 points at 23,159.14, with Virgin Money among those struggling after shares fell 5% or 10.4p to 190.4p in a weak session for all banking stocks.
BP not facing breakup pressure
11:42 , Oscar Williams-Grut
Some investors are pushing energy companies to spin out their renewable businesses. Both Shell and SSE are facing pressure.
Looney said BP was “not hearing that call from our investors”. The “complex” nature of the transition to net zero means “the role for a company like BP becomes clearer and clearer by the day.”
“Our strategy is clear, it’s increasingly clear,” he said. “Our financial framework is clear. I think our investor proposition is clear. I think it’s working.
“When I look at some of those renewable companies out there, some of them are struggling to fund their growth. That’s not a problem an integrated energy company has.”
Mould said: “Higher oil and gas prices are stoking BP’s financial performance and leaving it with the cashflow to both invest in renewable and alternative energy sources and reward shareholders for their support. Environmental campaigners will welcome the former but argue that the money used for the latter could instead by deployed to accelerate the company’s transition away from hydrocarbons.”
Paddy Power hit by ‘run of bad luck'
12:01 , Oscar Williams-Grut
The FTSE 100 giant warned it expects to miss its profits forecast by up to £130 million, with earnings outside the US of between £1.24 and £1.28 billion, down from its previous range of £1.27 billion to £1.37 billion.
CEO Peter Jackson said results that went against Flutter’s favour included Tyson Fury‘s October fight and 15 of the 16 favourites winning in the Champions League. The combined impact lost the company £60 million.
12:16 , Oscar Williams-Grut
The FTSE 100 drinks giant, behind brands from Johnnie Walker to Talisker, plans to open a 710,000 sq ft facility producing its first Chinese-origin single malt in Yunnan province. Construction on the Diageo Eryuan Malt Whisky Distillery is set to begin early next year and open in 2023.
China has a $1.7 billion whisky market, according to Euromonitor International. Diageo is targeting premium drinkers, and hopes its offering will rival local favourite baijiu as a go-to for gift-giving.
Annual sales surge at Sweaty Betty
12:52 , Joanna Bourke
The company, which last month launched a second collection with actress Halle Berry, saw turnover reach £126.5m in 2020 from £72.9 million a year earlier.
Read more HERE.
More on THG’s woes
13:03 , Oscar Williams-Grut
BlackRock’s THG share sale appears to have been confirmed. The Financial Times reports that the asset management giant sold almost half its stake in the e-commerce giant at a 10% discount to Monday’s closing price.
Russ Mould at AJ Bell says: “Asset managers rarely sell after a stock has already fallen so much unless they’ve lost all confidence in the business and/or found something that completely changes the investment case.
“The backlash against THG seems to centre on the fact that people bought into the hype without paying attention to valuation. Now that difficult questions are being asked about costs and more, particularly if the business is broken up into three as per the suggestion from THG, investors aren’t getting the answers they want – or they are not liking what they see.”
Shares are currently down 17.6p or 8% at 199.9p.
Barclays slammed for fossil fuel lending
13:53 , Oscar Williams-Grut
Barclays is in the dock over lending to fossil fuel polluters. A report published today by campaign group Market Forces said three major UK banks had helped fossil fuel businesses borrow $15 billion so far this year. Barclays provided the most funding, with $5.6 billion going towards oil and gas projects.
Market Forces’ Mia Watanabe said: “The science is clear - banks that keep funding fossil fuels can’t be climate leaders.”
A spokesperson for Barclays said: “We are aligning our entire financing portfolio to support the goals of the Paris Agreement - significantly scaling up green financing, directly investing in new green technologies and helping clients in key sectors change their business models to reduce their climate change impact.
“By 2025, we will reduce the emissions intensity of our power portfolio by 30%, and reduce absolute emissions of our energy portfolio by 15%.”
Barclays has pledged to make its lending portfolio net zero by 2050.
FTSE weighed down by earnings
14:24 , Oscar Williams-Grut
The FTSE 100 is lower in afternoon trade, largely being dragged down by stocks that reported earnings today.
The bluechip index is 32 points lower, down 0.4%, at 7256. Bottom of the index is Standard Chartered, down 7% despite posting a 44% leap in profits to more than $1 billion. Today’s figures were better than expected but it still forecast flat revenues for the full year. There is scepticism of the bank’s wider strategy. Like HSBC it is betting heavily on China.
Shortly behind is Paddy Power-owner Flutter Entertainment, which has sunk 4.6% after lowering full-year guidance. BP is down 3.8% despite beating forecasts on underlying earnings. An accounting treatment that pushed the oil giant to a statutory loss may have spooked investors.
BlackRock boss Larry Fink at COP26
14:55 , Oscar Williams-Grut
Larry Fink has told a panel at COP26 today that private companies have to match public firms in making big commitments to cutting carbon emissions if the world is to reach net-zero.
The co-founder, chairman and CEO of asset management giant BlackRock made the comments as he appeared on a Green Horizon Summit panel entitled “how to mobilise private capital in the transition to net zero” alongside fellow global finance bosses.
Fink said he is “very impressed by how fast public companies are moving forward” in reporting their emissions data.
But he warned: “If we don’t ask society to move forward, if we don’t ask private companies to move forward alongside public companies, we won’t get to net zero... [For Governments] asking public companies to do this is pretty convenient, but asking private companies and the rest of society to move forward, is much harder.
“My fear is that we’re moving public companies much faster than the rest of society, and that’s going to lead to a more polarised outcome.”
The CEO, who launched one of the world’s biggest investment institutions, said he believes “we are going to see more regulatory change to ask more companies to report” in future.
He concluded: “We have to be open minded about what it’s going to take [to reach net-zero]. We have to look beyond the window-dressing of just a commitment... we have to have the public and private world working together to come up with solutions. It is going to require an enormous amount of investment in the emerging world.”
Standard Chartered chair Jose Viñals, LSE chief executive David Schwimmer and NatWest CEO Alison Rose also spoke at the roundtable.