17.05 (close): Royal Dutch Shell helped keep the London market in positive territory today, despite shock figures showing a sharp slowdown in the US economy.
The world’s biggest economy barely grew in the first quarter as worse-than-expected data revealed the impact of weather disruption in the period.
The US dollar weakened as a result to leave sterling at near to 1.69 against the greenback, with the pound also benefiting from yesterday’s 0.8 per cent rise in UK GDP. It was flat against the resurgent euro, at 1.21.
The FTSE 100 Index maintained its position at an eight-week high despite the US figures, with the top flight ending the session up 10.1 points at 6780.
Royal Dutch Shell had a major bearing on the performance after new chief executive Ben van Beurden’s first results update triggered a four per cent jump in the oil giant’s share price.
First quarter profits fell sharply due to write-downs on refineries in Asia and Europe but the performance at an underlying level was better than expected and was accompanied by a four per cent increase in its dividend.
Shares rose 89p to 2520p and are now trading at their highest level since 2012 as the company’s turnaround plan gains traction and it benefits from high levels of cash generation.
IG market analyst Chris Beauchamp said: ‘BP is still hobbled by a variety of problems, but Shell has been able to spin a much more optimistic story and investors are reacting accordingly.’
Elsewhere in the sector, Heritage Oil was 23 per cent higher after the Jersey-based exploration and production company accepted a bid from a Qatari firm that values it at 320p per share, a 25 per cent premium to yesterday’s closing price.
Shares topped the FTSE 250 Index risers board, up 59.6p at 315.2p.
Back in the top flight, Rolls-Royce surged three per cent after it confirmed talks with Siemens over the potential sale of its gas turbine and compressor business.
Siemens is also interested in the energy business of Alstom as it looks to derail an existing deal between the French firm and US giant General Electric.
Rolls shares rose 29p to 1050p as analysts welcomed the moves to raise funds from the disposal of a business that has lacked scale.
Shares in fashion retailer Next were 35p higher at 6520p after it raised its full-year sales and profits guidance following a strong start to the year. It now expects profits will be between £750million and £790million, an increase of £20million at the top and bottom end of the range.
Brand sales for the first 13 weeks of its financial year rose 10.8 per cent, of which 2.2 per cent came from new space.
Elsewhere, insurer Standard Life fell 3.8p to 382.2p after it said UK annuity sales were down 50 per cent in the first quarter following rule changes in the Budget.
Despite the blow, chief executive David Nish said the wider company made a good start to the year, with assets under administration up 1.5 per cent to £247.8million.
The biggest FTSE 100 risers were Barratt Developments up 18.2p at 369.5p, Royal Dutch Shell ahead 89p at 2520p, Shire up 115p at 3378p and WPP ahead 38p at 1274p.
The biggest fallers were Tesco down 10.35p at 292.95p, Admiral off 44p at 1398p, GlaxoSmithKline down 33.5p at 1632p and British American Tobacco off 70p at 3417p.
16.00: The Footsie held modest gains in late afternoon trade as US made positive but tentative early progress after mixed economic data, with investors awaiting the latest Federal Reserve decision on monetary policy.
With half an hour of trading to go, the FTSE 100 index was up just 1.9 points at 6.771.8, well below the session peak of 6,94.88.
On Wall Street, the Dow Jones Industrial Average was 0.2 per cent, or 24.1 points higher at 16,559.4, with the broader S&P 500 index up 0.1 per cent and the tech-laden Nasdaq Composite index flat.
Investors were reluctant to take big bets after data showed the US economy grew at a sharply lower-than-expected pace in the first quarter, but gains in private payrolls kept the market near break-even.
US GDP rose at an annual rate of 0.1 per cent in the first quarter, the slowest since the fourth quarter of 2012, as exports and inventories weighed, a sharp pullback from the fourth quarter’s 2.6 per cent advance.
The ADP US private employers survey, however, beat expectations by adding 220,000 workers in April, the highest amount since November, and gains in the prior month were revised up, boding well for Friday’s official April non-farm payrolls (NFPs) report.
Chicago business activity also rose more than expected in April, jumping to its highest since October 2013.
Kathleen Brook, research director UK EMEA at FOREX.com: ‘The biggest shocker for some time, is how I would describe the US GDP miss for Q1, which came in at a mere 0.1 per cent, when the market had expected a 1.2 per cent annual rate.
‘Essentially the US economy didn’t grow in the first quarter, however at the same time that growth ground to a halt, the economy created over half a million jobs. Something doesn’t add up.’
Overall markets were awaiting the Fed’s policy-setting meeting which is expected to cut its bond-buying programme by a further $ 10billion, confident the US economy will pick up steam after a winter slowdown.
‘This report makes the FOMC decision due later today interesting. The market expects a continuation of the Fed’s tapering programme, for $ 10bn to be cut from asset purchases.
‘There is an increased risk that the Fed could hold pat on asset purchases for this month; however we think this is unlikely as the data for the first quarter of this year is difficult to read.
‘However, the Fed is unlikely to want to trigger an outsize market reaction so we don’t expect any over-reaction to this data from the FOMC today.
‘This GDP report is not a clear reflection of the US economy, and NFP’s on Friday are likely to be more important for overall market direction in the coming days and weeks,’ Brooks added.
12.00: The Footsie held firm at lunchtime as strong post-results gains from oil major Royal Dutch Shell offset worries over an escalation of violence in Ukraine and further evidence of deflationary pressures in Europe.
By midday, the FTSE 100 index was 15.4 points higher at 6,785.3, with the advance crimped by a total of nine blue chips, including supermarket giant Tesco trading ex-dividend today, knocking a combined 6.5 points off the index.
But even taking into account the impact of the adjustment in stocks trading without entitlement to their latest payout, the UK blue chip index would be in negative territory without the support from Shell’s two FTSE listings, which added around a combined 25 points to the index.
Ukraine tensions: Pro-Russian separatists tightened their grip on swathes of Ukraine’s industrial east, in a major escalation of their revolt despite new Western sanctions on Russia
Investors were cautious as pro-Russian separatists seized control of state buildings in the town of Horlivka, tightening their grip on swathes of Ukraine’s industrial east, in a major escalation of their revolt despite new Western sanctions on Russia.
Peregrine & Black senior sales trader Markus Huber said: ‘Positive corporate and economic data in recent weeks have unfortunately more or less been neutralised by the events unfolding in Ukraine. For now we are looking to sell into rallies and to buy on weakness.
Another negative, was news that Euro zone inflation nudged above 2009 lows in April but fell short of economists’ predictions despite increased spending at Easter, leaving the threat of deflation hanging over the European Central Bank (ECB).
Annual consumer inflation in the 18 countries sharing the euro was 0.7 per cent in April, just below the 0.8 per cent forecast, climbing from March’s 0.5 per cent, which was the lowest since late 2009. The figure was still within the ECB’s danger zone of below 1 per cent, reflecting the poor state of the economy for Britain’s biggest trading partner after a long recession.
Investors were also nervous ahead of the first reading for US first quarter GDP due at 1.30 pm, with growth forecast at 1.1 per cent, and the private sector ADP employment report for April which is a precursor of Friday’s key official US jobs data.
And after the London close today, the Federal Reserve will also reveal its latest US monetary policy decision, and although no changes are expected investors will be keen to hear Fed boss Janet Yellen’s comments in the accompanying press conference.
Still, Shell continued to provide the prop in London, with its stock up over 5 per cent, or 122.7p to 2,553.7p after the oil group reported an increase in cash flow in the first quarter of the year, allowing it to increase its dividend by 4 per cent year on year.
‘Shell significantly beat our expectations,” RBC Capital Markets analysts wrote in a note. ‘Quarterly cash flows are very volatile, but we regard this level as encouraging.
Also in the energy sector, explorer BG Group rose 19.5p to 1,200p, bouncing back after recent falls following the departure of its chief executive on speculation, fuelled by a report in the Financial Times, that BHP Billiton might make a bid. BHP Billiton shares were flat.
Another blue chip explorer, Tullow Oil gained 19.5p at 885.0p after the firm announced the sale of majority stakes in two UK North Sea gas assets to Faroe Petroleum for $ 75.6million.
Tullow, which recently reported another disappointing drilling update in African, said it was looking for buyers for other North Sea operations to concentrate on oil production in new markets.
Among the blue chip fallers, British American Tobacco shed 68.5p to 3,418.5p after it posted a 12 per cent drop in quarterly revenue, which it blamed on adverse foreign exchange movements.
While on the second line, chipmaker CSR dropped nearly 6 per cent, down 3.5.5p to 606.0p after its saw its first quarter revenues slump by nearly a quarter.
10.30: The Footsie shrugged off a cautious start to push higher by midmorning mainly fuelled by big gains from oil giant Royal Dutch Shell, after the first set of results under new chief executive Ben van Beurden.
Shell shares, which jumped 4 per cent, or 108p higher to 2,539p, were a big factor in the FTSE 100 index’s modest rise of 6.0 points to 6,775.9, while ex-dividend factors supressed the blue chip index’s rise by around 6.5 points.
Shell announced a big fall in first quarter profits due to write-downs on refineries in Asia and Europe but this was offset by a 4 per cent increase in its dividend and the promise of more asset sales.
Shell better: Strong gains by oil giant Shell help propel the Footsie modestly higher today
Chris Beauchamp, market analyst at IG said: ‘Although (Shell’s) profits were hit by writedowns, the firm beat expectations, and when set against BP’s results yesterday the enthusiastic reception becomes easy to understand.
‘BP is still hobbled by a variety of problems, but Shell has been able to spin a much more optimistic story and investors are reacting accordingly.’
BP shares managed to tick 0.9p higher today to 503,5p.
Elsewhere in the oil sector, small cap explorer Heritage Oil leap nearly 20 per cent, or 50.0p higher to 313.0p after the company accepted a bid from a Qatari firm that values Heritage at 320p per share.
‘From the trading we have seen today it looks to be a done deal, and will be welcome news for shareholders who have seen the company’s share price go nowhere since the beginning of 2012, stuck between 100p and 200p,’ IG’s Beauchamp said.
Back among the top flight risers, Rolls-Royce gained 2 per cent, or 2.5p to 1,043.5p after the engineer confirmed it was in talks with Siemens over the potential sale of its commercial energy assets, as analysts welcomed the proceeds from the disposal of a business that has lacked scale.
Fashion retailer Next was another blue chip gainer, up 70p to 6,555p, after it raised its full-year sales and profits guidance following a strong start to the year.
Next said Brand sales for the first 13 weeks of its financial year rose 10.8 per cent, of which 2.2 per cent came from new space.
But on the downside, insurer Standard Life fell 11.7p to 374.3p after its said UK annuity sales were down 50 per cent in the first quarter following rule changes in the Budget.
08.30:The Footsie eased back in early trade this morning, reflecting a mixed showing overnight in Asia as traders digested a big batch of corporate updates including numbers from oil giant Royal Dutch Shell and high street firms Next and Home Retail Group.
In opening deals, the FTSE 100 index was down 1.9 points at 6,768.0, slipping back following a 69.75 point jump yesterday to its highest close since March 6.
However, ex-dividend factors knocked 6.5 points off the UK blue chip index today, with nine components including Tesco, William Hill and ITV trading without entitlement to their latest payout.
Markets mixed: US stocks closed higher yesterday, but Asian markets were mixed today and the Footsie started lower
Aside from the busy day for corporate updates there will also be an important clutch of economic news released later.
Sam Fox, financial sales at Spreadex said: ‘Of high impact, the EU CPI figure will be released at 10:00, set to come in at 0.8 per cent shortly followed by ADP Non-Farm Employment Change over in the US, forecasted at 203k.
‘Markets may be particularly twitchy today as investors await this evenings FOMC Statement at 19:00 BST which is often the catalyst for significant movements in global markets.’
After yesterday’s UK GDP data, no important domestic data is scheduled for today, although a pair of consumer confidence reports released overnight were strong
A GfK survey showed UK consumer confidence improved in April to reach the highest level since 2007, and a separate survey from Nielsen found the proportion of Britons feeling positive about their job prospects hit 36 per cent in the first three months of the year, the highest level since before the financial crisis.
Stocks to Watch include:
NEXT – Britain’s second biggest clothing retailer, raised its year profit guidance after posting a strong rise in first-quarter sales.
HOME RETAIL GROUP – Britain’s biggest household goods retailer, posted a 27 per cent rise in full-year profit as its digital push at Argos and revamps at Homebase start to bear fruit.
ROYAL DUTCH SHELL – The oil major saw its first-quarter earnings almost halve from a year ago to $ 4.5billion mainly due to a $ 2.9billion charge reflecting impairments related to refineries in Asia and Europe.
TULLOW OIL – The Africa-focused oil and gas explorer has sold majority stakes in two UK North Sea gas assets to Faroe Petroleum for $ 75.6million. Tullow added it would maintain its 2014 production target at 79,000-85,000 barrels of oil equivalent per day.
ANTOFAGASTA – The Chilean miner saw its copper production shrink in the first quarter versus the previous quarter mainly due to scheduled plant maintenance at its Los Pelambres and Esperanza operations.
BRITISH AMERICAN TOBACCO – The maker of Pall Mall and Lucky Strike cigarettes reported lower revenue for the latest quarter, hurt by foreign exchange rates and a slight decline in the number of cigarettes sold.
STANDARD LIFE – The financial services group said the UK’s introduction of automatic enrollment of workers onto company pension schemes has helped boost business flows this year.
BARCLAYS -The bank will next week announce the creation of a bad bank portfolio of assets it deems non-core that it intends to sell or run down as part of a streamlining of its investment bank.
ROLLS-ROYCE – The company said yesterday that it was in talks with Germany’s Siemens to sell a unit that makes equipment for the oil and gas industry and power-generation gear for utilities.