UK stocks ended the week firmly lower as investors were handed a GDP reality check after two days of substantial corporate losses.
The benchmark FTSE 100 closed 1.3% down on Friday to close at 5,913.30, a level last seen in the middle of May, with massive losses reported by British Airways-owner International Consolidated Airlines (IAG) and the renamed NatWest (NWG) giving investor pause for thought after strong quarterly earnings from US big tech.
Sales updates from US tech giants Alphabet (which owns Google), Amazon, Apple and Facebook all beat market expectations, demonstrating the strength of their businesses during the pandemic and leading to renewed gains for the Nasdaq technology index.
The mid cap FTSE 250 was brighter, rallying 0.65% at 17,125.57.
Meanwhile the pound strengthened against the dollar, pushing to $1.312 against the greenback, as gold prices renewed their advance towards the $2,000 per ounce level and Brent crude oil prices edged higher to $43 per barrel.
EARNINGS IN FOCUS
Shares in flag-carrier International Consolidated Airlines, which owns British Airways and Iberia, fell 7.5% to 167p after the group reported a 60% drop in first half revenues as passenger volumes collapsed 95% in the second quarter due to travel restrictions.
The firm also surprised investors with a proposed €2.75 billion capital increase, with ‘irrevocable support’ from its largest shareholder Qatar Airways, which owns 25.1% of the capital, even though it already has over €8 billion in available liquidity.
But the renamed NatWest Group closed a fraction higher at 106.8p as the high street lender reported a first half loss of £770 million due to net impairment charges of £2.86 billion for potential bad loans.
The bank signalled weak revenues in its consumer and corporate business and a further decline in its net interest margin – the difference between the rate of interest it charges on loans and the rate it pays on deposits – although its Markets business performed well thanks to higher volatility and increased trading volumes.
COST CUTS PAY OFF
Turnover in the first six months was up 2.4% on a like for like basis to £12.27 billion while lower costs drove a 16% increase in operating profits and a 22.7% increase in earnings per share. The company also confirmed its full year growth targets and its 65% dividend payout ratio.
BAT shares slumped 3.5% to £25.6325.
Shares in BT (BT.A) sharply reversed on Friday, plunging 7.5% to 100p, lows not seen since the 2009 financial crisis, after the telecom posted lower first quarter earnings due to reduced enterprise revenues and reduced BT Sport revenue as football fixtures were suspended during the pandemic.
This despite the firm forecasting a return to growth next year.
Chief executive Philip Jansen said that although uncertainties over the economy remain, ‘Beyond this year and based on current expectations, we expect to return the business to sustainable adjusted EBITDA growth.’
London Stock Exchange (LSE) moved up 1.8% to £84.85 as it reported an 8% rise in first half income to £1.235 billion, driven by a strong performance at its London Clearing House subsidiary and a contribution from the newly consolidated FTSE Russell index business.
The group also announced that following the European Commission’s expanded review into its proposed purchase of information firm Refinitiv, it was looking into selling either its interest in MTS or possibly the Borsa Italiana group as a whole. US regulators have already approved the deal without conditions.
ESLEWHERE ON THE MARKET
Miner and commodities trader Glencore (GLEN) slipped 1.3% to 174.82p even as it cut its output guidance for nickel and coal, citing pandemic-related disruptions.
Pet product retailer and veterinary business Pets at Home (PETS) rallied 23% to 311p despite its first-quarter revenue slipping 0.7%.
Pets at Home said conditions had improved in the latter part of the trading period after lockdowns were eased.
Polling and data group YouGov (YOU) stayed flat at 800p, a success in itself given the market’s wider declines, even as it announced growth in revenue and profits in its financial year through July, in line with its expectations.
Specialist lender Paragon Banking (PAG) stayed virtually unmoved at 316p on announcing that payment deferrals had been applied to just under 21% of its loan balances owing to the Covid-19 crisis.
Paragon Banking said it also saw no need to add further credit provisions for the third quarter.