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FTSE preview: China, Standard Chartered and BP set pulse of global markets

·4-min read

Early-bird eyes on China this morning after an outbreak of Delta variant cases in a previously little-known place called Wuhan.

Roads and railways into Beijing and other major cities are being sealed off as officials attempt to put out the flare-ups which are scattered rather worryingly across several provinces.

One FTSE 100 listed company surely taking a keen interest is Standard Chartered. The London based but Asia focused venerable old bank today became the latest to report bumper six-month profits.

Most of the good cheer appears to come from the reallocation of around £1billion set aside as a buffer against bad loans. It reported an underlying pretax profit of $1.24billion, ahead of estimates of $940million, alongside a 26% jump in operating income for its wealth management division..

Despite the reintroduction of dividends and launch of major share buybacks, the reaction of the City to a healthy bank earnings season has been to shrug.

Share prices of the big European banks - Barclays, NatWest, BBVA, HSBC - have barely ticked upwards despite a run of bumper second-quarter results in the past seven days, according to Bloomberg analysis.

“I don’t think the market is concerned about delta as much as it’s concerned about how it impacts inflation,” Shana Sissel, Spotlight Asset Group chief investment officer, told Bloomberg. “The longer we have delta spread globally, the longer the supply chain disruptions will continue.”

Closer to home, a string of corporate results should keep traders busy.

First up is BP. The oil-and-gas group’s share price has risen 14% in the year to date but remains stubbornly at around 50% of its pre-pandemic level of around 500p despite oil prices hitting a near three-year high.

It hit its $35billion debt reduction target a year earlier than expected, opening the floodgates to $500million of share buybacks this year.

BP stock has 14 ‘buy’ recommendations, nine ‘holds’ and four ‘sells’. The stated target price of £358.18 suggests a potential 24.2% upside from current price.

Having seen $1.7bn of positive cash flow in Q1, BP did say that cash flow in Q2 would be impacted by its annual $1.2bn Gulf of Mexico oil spill payment, and that as a result was likely to see a deficit for this quarter, however that isn’t likely to explain the weakness. It could be that shareholders aren’t convinced that the plans for a 40% reduction in oil and gas production is achievable without hammering margins.

Domino’s Pizza, Fresnillo, Greggs, Hiscox, Keller, and Travis Perkins are all due to publish interim results.

The FTSE 250 hit a high yesterday, lifted by US defence giant Parker-Hannifin’s £6.3 billion takeover swoop on UK rival Meggitt at an eye-watering 70% premium. The deal has implications for jobs and the UK’s defence supply chain and joins the list of sensitive buy-ups being closely watched by Kwasi Kwarteng.

London’s resource giants helped lead the FTSE 100 higher as Anglo American kicked off a plan to buy back one billion dollars of its own shares.

The company bought more than £5 million of its own shares from the market, driving up the price by 3.4%.

It put the miner close to the top of the FTSE 100 list of companies, and other miners were not far behind.

At the end of the day they helped create the difference that pushed the index far into the green.

It rose 49.42 points to 7,081.72.

Today a slight dampening was expected with the FTSE 100 being called to open down 3 points lower at 7078 in what is shaping up to be - in CMC Markets’ analyst Michael Hewson’s words - a repeat of July’s “Jekyll and Hyde market, optimistic one day, and pessimistic the next.”

Sterling dipped around 0.1% and would buy 1.3888 dollars or 1.1694 euros by the end of the day.

The price of Brent crude oil dropped 3.3% to 72.89 dollars per barrel.

The biggest risers on the FTSE 100 were Melrose Industries, up 8.3p to 168.4p, Rolls-Royce, up 3.77p to 103.48p, Anglo American, up 109.5p to 3,300p, IAG, up 5.36p to 173.46p, and Burberry, up 61p to 2,125p.

The biggest fallers on the FTSE 100 were Pearson, down 42.4p to 827p, United Utilities, down 23p to 1,439p, Admiral Group, down 17p to 3,383p, Unilever, down 18p to 4,133p, and Johnson Matthey, down 10p to 2,962p.

Further ahead this week:

• Earnings are due from Alibaba, BP, Toyota, Uber, Roku, Moderna, KKR

• Bank of England is expected to keep its benchmark interest rate and its bond-buying target unchanged on Thursday

• Reserve Bank of India monetary policy decision, briefing Friday

• The US jobs report is expected to show another robust month of hiring Friday

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