FTSE100 Outperforms After BP Beats Expectations

FTSE100 Outperforms After BP Beats Expectations

CMC Markets  | Jul 30, 2019 09:39

It’s been a subdued start for markets in Europe, despite Asia markets closing higher, in the wake of the Bank of Japan’s latest decision to keep monetary policy unchanged.

The FTSE100 opened higher, once again driven by another sterling related sell-off in Asia, as we head into another earnings heavy session for UK corporates.

Having seen its profits more than double in Q1, expectations were high that BP (LON:BP) would be able to better these numbers given the rise in average oil prices seen during the course of Q2.

The company didn’t disappoint as increased production returns that were a feature of the company’s Q1 numbers carried over into Q2, with an increase of 4%, which has helped drive profits to increase to $2.81bn.

In terms of provisions for Deepwater Horizon the company paid out $1.4bn on a post-tax basis.

On the debt front there has been little in the way of progress with a gearing of 31%, which remains slightly over the company’s 25% to 30% target ratio.

This reluctance to lower the debt levels from the current $46.5bn remains the only cloud over what is a very encouraging set of numbers with its green energy Lightsource continuing to make progress

Reckitt Benckiser (LON:RB) first half results appear to show that the company still has plenty of challenges to deal after the company cut its full year revenue target, by a full percentage point, to a range of 2-3% due to a slowdown in its baby milk formula business in China.

Sales growth also fell short of expectations, coming in flat, with the company blaming a slow start to the year. The company was more optimistic for the second half of the year, as management expressed optimism of a pickup in the markets which had a weak first half. Investors appear less convinced with the shares falling back, after the gains seen yesterday.

The recent settlement with the US Department of Justice over the marketing of Suboxone when the company owned Indivior for $1.4bn is also one headwind the company won’t have to deal with in the future.

Centrica (LON:CNA) shares have also plunged after management cut the dividend from 12p to 5p for 2019. CEO Ian Conn has also announced that he is to step down, which is probably just as well given that he would probably have been pushed out, given how the share price has performed since he took over.

When Mr Conn took over the reins at Centrica the share price was just below 300p, and it’s been pretty much one way traffic since then. In a word the share price performance has been woeful. Against that last year he received a pay rise of 44%, quite awful optics when set against a headcount that has seen 4,000 people lose their jobs and the loss of 742k customers.

Revenues came in at £13.8bn a fall of 2% while the company fell to a loss of £446m with the company blaming an exceptionally challenging environment, an excuse that is likely to be starting to wear a bit thin with shareholders.

The pound has continued to come under pressure this morning, hitting a new two year low against the US dollar with the next key support level sitting at the 2017 lows at 1.1985.

The more uncompromising tone from the UK government in the past week or so has raised concerns that the UK and EU are on a collision course for a rupture at the end of October, as both sides embark on a staring contest across the Channel, with little sign that talks are set to restart in the near future.

US markets looks set to open broadly unchanged as the latest Federal Reserve rate meeting gets underway, and the earnings season continues apace.

Last night Beyond Meat (NASDAQ:BYND) posted a bigger than expected loss in Q2 of $0.24c a share though they did upgrade their full year outlook for revenues. While the revenue outlook is encouraging, after sales grew to $67.3m well above the $52.5m expected the share price has moved way beyond where it should be based on the fundamentals.

Despite the improved revenue outlook the shares look set to open sharply lower after the company revealed it was looking to sell up to 3.25m extra shares in a secondary offering. Given that we’ve seen the share price move from $25 to well above $200 it’s not hard to see why management are seeking to do that.

Apple (NASDAQ:AAPL) are also looking to release their latest numbers for Q3 after the bell later today. Expectations for Q3 have already been set quite low at $53.4bn in revenues with profits set to come in at $2.10c a share, below last years $2.34c.

One thing that could help drive an improvement is the recent product enhancements to the iPad and Mac which were announced at the end of Q2, which could have prompted a pickup in demand here. The importance of services is also likely to continue to show decent growth ahead of the release of Apple+ in the autumn.

Dow Jones is expected to open 20 points lower at 27,201

S&P500 is expected to open 2 points lower at 3,019

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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