LONDON MARKET OPEN: BP bolsters FTSE 100; DAX lags on Infineon drag

(Alliance News) - Stocks in London managed to shake off a wobbly session in Asia overnight to post some early gains, boosted as oil major BP unveiled a share buyback and lender Standard Chartered recorded a sharp rise in interim profit.

The FTSE 100 index was up 24.56 points, or 0.4%, at 7,106.28 early Tuesday. The mid-cap FTSE 250 index was up 57.18 points, or 0.3%, at 23,265.85. The AIM All-Share index was up 0.1% at 1,258.75.

The Cboe UK 100 index was up 0.3% at 707.43. The Cboe 250 was up 0.2% at 21,007.12, and the Cboe Small Companies down 0.1% at 15,222.77.

Helping to push up the FTSE 100 was BP, rising 2.7%, and to top the blue-chip index gainers list, after lifting its dividend and unveiling a share buyback.

The oil producer 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.

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. Brent prices have risen 50% since 2021 began.

Standard Chartered rose 1.2% as it recorded a sharp jump in interim profit. In the six months to June 30, the London-headquartered but Asia-focused lender recorded pretax profit of USD2.56 billion, up sharply from USD1.63 billion a year before.

Contributing to the profit boost was a sharp drop in the bank's credit provision, which turned into a USD51 million release in the first half compared to the USD1.58 billion provision booked last year.

Fresnillo rose 1.2% after the precious metals miner posted a profit surge on an improvement in metal prices.

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.

Capping the blue-chip index's move higher was Smiths Group, falling 5.0% after agreeing to sell its Smiths Medical unit to private equity firm TA Associates.

The deal, announced on Monday after the London market close, values Smiths Medical at an enterprise value of USD2.3 billion, equivalent to GBP1.7 billion, plus an additional USD200,000 contingent on future performance of Smiths Medical.

Smiths said the deal is superior to all other proposals received during the separation process and is considered a better outcome for shareholders than a demerger.

In the FTSE 250, Rotork shares slumped 7.0% after saying Chief Executive Kevin Hostetler plans to depart the firm to return home to the US.

Hostetler is "fully committed" to leading Rotork through his notice period, and to ensuring an effective handover to his successor, at which time he will step down as CEO. This process is expected to conclude by the end of June next year.

Separately, the electric, pneumatic and hydraulic valves manufacturer said revenue for the first half of 2021 rose 1.8% year-on-year to GBP288.3 million and pretax profit increased 8.4% to GBP54.1 million.

In mainland Europe, the CAC 40 in Paris was up 0.6%, while the DAX 30 in Frankfurt was down 0.1% early Tuesday.

Dragging on Frankfurt was semiconductor producer Infineon Technologies, which fell 4.5% as it reported revenue growth was limited in its third quarter due to manufacturing constraints.

In the three months to the end of June, revenue rose 1% quarter-on-quarter to EUR2.72 billion. Despite strong demand, revenue only inched up due to pandemic-related constraints on its manufacturing capacity in Melaka, Malaysia, and the aftermath of the winter storm in Austin, Texas.

"Inventories are at a historic low; our chips are being shipped from our fabs straight into the end applications. Under these circumstances, any pandemic-related restrictions on manufacturing, such as those recently imposed in Malaysia, are especially grave," wanted Chief Executive Reinhard Ploss.

The CAC 40, meanwhile, was driven by car maker Stellantis, which rose 4.2%. It reported 46% year-on-year growth in proforma revenue for the first half of 2021, while it swung to a net profit of EUR5.94 billion from a loss of EUR813 million.

In China, the Shanghai Composite index closed down 0.5% and the Hang Seng index in Hong Kong was down 0.4% in late trade. The Nikkei 225 index in Tokyo ended down 0.5% and the S&P/ASX 200 in Sydney closed down 0.2%.

Sterling was quoted at USD1.3911 early Tuesday, firming on USD1.3900 at the London equities close on Monday. The euro was flat at USD1.1879 versus USD1.1880 late Monday. Against the Japanese yen, the dollar slipped to JPY109.16 versus JPY109.30.

The economic events calendar on Tuesday has eurozone producer prices at 1000 BST.

By Lucy Heming; lucyheming@alliancenews.com

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