(Alliance News) - Stocks in London are set to pull back on Tuesday as worries over the path of the global economic recovery crept in overnight.
In early UK company news, BP upped its dividend and unveiled a USD1.4 billion share buyback as it swung to a second-quarter profit, Fresnillo's profit soared as metal prices improved, and Greggs resumed its dividend as sales returned to pre-pandemic levels.
IG says futures indicate the FTSE 100 index of large-caps to open down 8.02 points, or 0.1% at 7,073.70 on Tuesday. The FTSE 100 closed up 49.42 points, or 0.7%, at 7,081.72 on Monday.
The lower call for London follows a soft end in New York on Monday. The Dow Jones Industrial Average ended down 0.3% and the S&P 500 lost 0.2%, but the Nasdaq Composite closed up 0.1%.
"Financial markets wobbled overnight after the US manufacturing PMI didn't hit the heady heights expected by markets. To be fair, a print of 59.5 is still impressive, but like technology stocks, the bar is set high, and markets have itchy trigger fingers nowadays if the music isn't playing loud enough," said Jeffrey Halley, senior market analyst at Oanda.
The ISM manufacturing purchasing managers' index fell to 59.5 points in July from 60.6 in June, and was below market forecasts of 60.9. The latest reading pointed to the second consecutive month of slowing factory growth and was the weakest in 6 months.
Halley added: "We can also throw the Covid-19 delta-variant into the mixture, with concerns rising once again, that the global recovery could be thrown off track by the virus."
Authorities in Wuhan on Tuesday said they would test its entire population for Covid-19 after the central Chinese city where the coronavirus emerged reported its first local infections in more than a year.
Authorities announced on Monday that seven locally transmitted infections had been found among migrant workers in the city, breaking a year-long streak without domestic cases after China squashed an initial outbreak with an unprecedented lockdown in early 2020.
China has confined the residents of entire cities to their homes, cut domestic transport links and rolled out mass testing in recent days as it battles its largest coronavirus outbreak in months.
In China, the Shanghai Composite index and the Hang Seng index in Hong Kong both were down 0.4%. The Nikkei 225 index in Tokyo ended down 0.5% and the S&P/ASX 200 in Sydney closed down 0.2%.
The dollar firmed as the mood soured. Sterling was quoted at USD1.3889 early Tuesday, easing from USD1.3900 at the London equities close on Monday. The euro softened to USD1.1872 from USD1.1880 late Monday.
However, the safe-haven yen advanced. The dollar slipped to JPY109.12 versus JPY109.30.
In early UK company news, BP lifted its dividend and unveiled a USD1.4 billion share buyback, and dangled the prospect of more of both to shareholders.
The oil major swung to an underlying replacement cost profit for the second quarter of USD2.80 billion from a USD6.68 billion loss a year ago. It also marked an improvement from the first quarter of 2021, when it recorded profit of USD2.63 billion.
Profit was driven by higher oil prices and margins, offset by a lower result in gas marketing and trading
"Based on the underlying performance of our business, an improving outlook for the environment and confidence in our balance sheet, we are increasing our resilient dividend by 4% per ordinary share and in addition, we are commencing a buyback of USD1.4 billion from first half surplus cash flow," said Chief Executive Bernard Looney.
BP declared a dividend of 5.46 cents for the quarter, up 4.0% from 5.25 cents a year ago.
Operating cash flow was USD5.41 billion in the period, up from USD3.74 billion a year ago. BP said it generated surplus cash flow of USD700 million in the second quarter and USD2.4 billion in the first half after having reached its net debt target of USD35 billion.
The company's net debt stood at USD32.71 billion at June 30, down from USD40.92 billion a year ago.
Looney added: "On average at around USD60 per barrel, we expect to be able to deliver buybacks of around USD1.0 billion per quarter and to have capacity for an annual increase in the dividend per ordinary share of around 4%, through 2025."
Brent oil was trading at USD72.75 a barrel early Tuesday morning in London, down from USD73.58. After recovering from pandemic-induced lows, Brent has consistently traded above USD60 per barrel since early February 2021. Brent prices have risen 50% since 2021 began.
Precious metals miner Fresnillo posted a profit surge as metal prices improved in the first half of the year.
Total revenue for the first half of 2021 was USD1.47 billion, up 39% on a year ago. Cost of sales rose at a slower pace, up 17% to USD860.1 million. This helped pretax profit to triple to USD445.4 million from USD127.9 million a year ago.
The average realised silver price increased 57% from a year before to USD26.4 per ounce, while the average realised gold price rose 6.7% to USD1,789.2 per ounce. Gold was quoted at USD1,808.59 an ounce early Tuesday, lower than USD1,814.25 on Monday.
"The combination of improved production performance and higher precious metals prices has seen a sharp increase in profitability during the period. This in turn, has enabled us to declare a dividend of USD73.0 million to shareholders, while continuing to invest in both our development and exploration projects," said Chief Executive Octavio Alvidrez.
Fresnillo declared an interim dividend of 9.90 cents per share.
The miner said it remains to track to hit its full-year silver and gold production guidance.
"We are assessing any potential impact that might result from the implementation of the new law restricting the ability to subcontract labour in Mexico. However, these new measures are not expected to materially impact second half production," said Fresnillo.
Baked goods retailer Greggs swung back to profit in the first half of 2021 and reinstated its dividend.
Total sales for the half-year that ended July 3 returned to pre-pandemic levels, at GBP546.2 million. This was up sharply on GBP300.6 million a year ago, and level with the result reported for the first half of 2019, of GBP546.3 million, being a completely coronavirus-free period.
"Sales in the second quarter exceeded our expectations, delivering like-for-like sales growth versus the second quarter of 2019. We continue to make good progress with our strategic priorities, growing the shop estate and investing in our digital capabilities to compete in all channels and dayparts of the food-on-the-go market," it said.
Gregg's pretax profit for the period was GBP55.5 million, swinging from a loss of GBP65.2 million a year ago and overtaking 2019's outturn of GBP36.7 million. Further, it now expects full-year profit to be "slightly ahead" of previous internal forecasts.
The FTSE 250 constituent declared an interim dividend of 15.0p per share, versus nothing a year ago. Greggs last paid a dividend in October 2019, after which the planned final dividend for 2019 was cancelled to help the firm weather the coronavirus crisis.
"Whilst there are still significant uncertainties in the months ahead, we now have a strong cash position and additional financing facilities to draw on if required," it said.
The economic events calendar on Tuesday has eurozone producer prices at 1000 BST.
By Lucy Heming; lucyheming@alliancenews.com
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