FTSE 100 flatlines as companies reveal mixed earnings
The FTSE 100 closed flat on a choppy day of trading as investors mulled company earnings, the chances of more economic stimulus and rising coronavirus cases around the world.
London’s blue chip index closed marginally lower at 6,027 points. The FTSE 250 index of slightly smaller, domestically focused firms ended the session up 0.73 per cent.
Read more: BP halves dividend after record loss in coronavirus quarter
In Europe, Germany’s Dax was 0.37 per cent lower. France’s CAC 40 was up 0.29 per cent and the continent-wide Stoxx 600 slipped 0.1 per cent.
Overnight in Asia, China’s SSE Composite index rose 0.1 per cent. Hong Kong’s Hang Seng jumped two per cent and Japan’s Nikkei climbed 1.7 per cent.
Gold continued to tread water at $1,977 an ounce. It hit an all time high of more than $1,980 an ounce last week as investors sought returns amid depressed real bond yields and a falling dollar.
“UK stocks are flat today, despite an overwhelmingly positive session throughout Asia,” said Joshua Majony, senior market analyst at trading platform IG.
“While the PMI data released yesterday has helped boost sentiment around the July recovery, we are seeing ongoing fears of a less fiscally accommodative environment hamper that optimism.”
“With major differences in opinion over exactly what any fiscal accommodation should look like, the ultimate decision from Congress will be a major determinant of market sentiment as we move forward,” he added.
Diageo weighs down FTSE 100
Earnings season rumbled on, with FTSE 100 firms revealing the heavy hits they took at the height of the pandemic.
Engineering group Babcock’s shares slumped 10.23 per cent after it said its underlying profit tumbled by 40 per cent in the first three months of the year.
Drink-maker Diageo’s shares dropped 5.55 per cent. The world’s largest spirits-maker reported a bigger-than-expected drop in sales as demand evaporated during the coronavirus pandemic.
Oil giant BP slashed its dividend for the first time since 2010 as it tries to steady its finances.
However, its shares shot up 7.4 per cent in morning trading, before closing 3.4 per cent higher. This was partly because its underlying replacement cost losses of $6.7bn (£5.1bn) were slightly better than analysts had been expecting.
Airline Easyjet’s shares took off, jumping 8.8 per cent, after a third-quarter trading update. It plans to fly at around 40 per cent of capacity for the rest of the summer, a higher number than anticipated.
“The numbers for the third quarter were terrible,” said David Madden, market analyst at trading platform CMC Markets. But he added that “the group is performing ahead of expectations”.
US stocks mixed amid escalating Sino-US tensions
US stocks were subdued on Tuesday as tensions with China escalated following President Donald Trump’s moves to force a sale of TikTok’s US operations.
Disappointing corporate earnings also did little to help optimism, as Ralph Lauren slumped 6.8 per cent after quarterly revenue plunged by nearly $1bn.
The Dow Jones is up 0.5 per cent while the benchmark S&P 500 traded 0.25 per cent higher. The tech-heavy Nasdaq opened lower before edging 0.02 per cent higher. Yesterday the index hit a new record high but investors remain worried that Congress will continue to disagree over the next round of stimulus.
There are currently “major differences in opinion” between the Republicans and Democrats, Mahony said.
“The ultimate decision from Congress will be a major determinant of market sentiment as we move forward.” FTSE 100 and global investors will keep a wary eye on the talks.
On the virus front, there are encouraging signs emerging as many hotspots start to show small improvements.
“New cases and hospitalizations are declining in most second wave states, but this will need to improve more strongly for optimism to grow schools to have a successful school opening in September,” said Edward Moya, senior analyst at Oanda.
Yesterday it was reported that California and Georgia reported the smallest rise in coronavirus cases in nearly a month.
Read more: Easyjet to expand flight schedule due to demand for holidays
The dollar slipped 0.2 per cent against a basket of other currencies. It is trading at two-year lows as the US struggles to deal with coronavirus.
That helped the euro continue its stellar rise. The single currency gained 0.3 per cent against the greenback to buy $1.179. It is trading close to two-year highs after the EU agreed on a €750bn (£680bn) bailout fund.