LONDON MARKET OPEN: Smith & Nephew Sinks After Covid-19 Hits Earnings

(Alliance News) - Stock prices in London opened mixed on Thursday with Smith & Nephew, domestic ...

Alliance News 18 February, 2021 | 8:51AM
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(Alliance News) - Stock prices in London opened mixed on Thursday with Smith & Nephew, domestic banks and a slew of ex-dividends shares weighing on the FTSE 100.

London's blue-chip index was down 20.05 points, or 0.3%, at 6,690.85. The FTSE 250 index was up 60.16 points, or 0.3%, at 21,209.65, and the AIM All-Share index was flat at 1,222.95.

The Cboe UK 100 index was up 0.1% at 667.81 points. The Cboe 250 was up 0.1% at 18,716.02, but the Cboe Small Companies was flat at 12,818.71.

The CAC 40 index in Paris was up 0.1% and Frankfurt's DAX 30 was 0.3% higher.

In the FTSE 100, Ashtead Group was the best performer, up 3.1% after Goldman Sachs started coverage on the equipment rental firm with a Buy rating.

Aviva was up 1.5% after Citigroup upgraded the insurer to Buy from Neutral.

At the other end of the large-caps, Smith & Nephew was the worst performer, 7.5% lower. The medical devices maker reported a fall in annual earnings, as the coronavirus pandemic caused elective surgical procedures to be put on hold.

For 2020, revenue was down 11% to USD4.56 billion from USD5.14 billion in 2019 and trading profit fell sharply to USD683 million from USD1.17 billion. The company declared a full-year dividend of 37.5 US cents per share, unchanged from 2019.

Looking ahead to 2021, Smith & Nephew said the outlook reflects the likely continuation of Covid-19 effects during the first half of 2021 and the uncertainty regarding the timing and pace of recovery.

Imperial Brands, GlaxoSmithKline, BP and Royal Dutch Shell 'A' and 'B' shares were down 4.0%, 2.5%, 0.4%, 0.6% and 0.7%, respectively. The stocks went ex-dividend meaning new buyers no longer qualify for the latest payout.

NatWest Group was 1.5% lower. The Financial Times reported that the UK state-backed lender is gearing up to gradually withdraw from the Republic of Ireland, with the aim of freeing up capital and moving completely to the UK market.

Peer Barclays was down 1.1% after the bank reported a drop in annual earnings - with profit falling by almost a third in 2020.

However, Barclays said it would resume dividend payments after the Bank of England lifted its ban on shareholder distributions in December.

For 2020, Barclays posted net income of GBP21.77 billion, up 1% from GBP21.63 billion in 2019, as net interest income fell 14% to GBP8.12 billion from GBP9.41 billion.

Barclays booked GBP4.84 billion in credit impairments in 2020, more than doubled from GBP1.91 billion in 2019.

Pretax profit sank 30% to GBP3.07 billion from GBP4.36 billion. However, the figure beat company-compiled consensus which forecast pretax profit of GBP2.81 billion.

Barclays declared a dividend of 1.0 pence for 2020, down from 3.0p paid in 2019. In addition, Barclays said it intends to initiate a share buyback of up to GBP700 million, which is expected to commence in the first quarter of 2021.

Richard Hunter, head of Markets at interactive investor, commented: "The results are far from perfect, but in opening the reporting season Barclays has set the bar high for its rivals. The unavoidable spectre of the pandemic dominates the figures.

"Group income for the year rose by 1%, propelled by a rise of 22% in the Corporate Investment Bank and offsetting the declines of 22% in Consumer Cards & Payments and 14% in Barclays UK. As customers have battened down the hatches in depositing more with the bank, they have also attempted to pay down credit card debt, for example, both of which drag on the bank's income."

Fellow UK bank Lloyds was 1.8% lower.

The pound was quoted at USD1.3875 early Thursday, up from USD1.3845 at the London equities close Wednesday.

The euro was priced at USD1.2050, higher against USD1.2036. Against the yen, the dollar was trading at JPY105.81, flat from JPY105.82.

Brent oil was quoted at USD65.01 a barrel Thursday morning, up sharply from USD63.53 late Wednesday, as US refining and extraction capacity remains shuttered due to deadly wintry conditions in Texas.

Gold was trading at USD1,783.15 an ounce, higher versus USD1,774.53.

The Japanese Nikkei 225 index closed down 0.2% on Thursday. In China, the Shanghai Composite ended up 0.6%, while the Hang Seng index in Hong Kong ended down 1.5%. Financial markets in Shanghai reopened after being closed over the past week for the Lunar New Year holiday. The S&P/ASX 200 in Sydney ended flat.

In the economic calendar for Thursday, there is Irish inflation at 1100 GMT and US initial jobless claims at 1330 GMT.

By Arvind Bhunjun;

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Smith & Nephew PLC 1,386.00 GBX -0.96
Aviva PLC 390.55 GBX -0.55
Imperial Brands PLC 1,563.00 GBX 0.13
BP PLC 305.52 GBX 0.83
Royal Dutch Shell PLC B 1,464.80 GBX 1.48
Barclays PLC 179.68 GBX 0.47
Lloyds Banking Group PLC 45.85 GBX -3.08
Royal Dutch Shell PLC Class A 1,480.00 GBX 1.18
Ashtead Group PLC 5,316.55 GBX 0.01
NatWest Group PLC 210.80 GBX 0.19
GlaxoSmithKline PLC 1,439.40 GBX 0.40

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