The Board of the Federal Reserve made comments in its monthly meeting that were interpreted as hawkish. That and weak trading statements from Barclays and Royal Dutch Shell explain a 1 per cent plunge in the FTSE 100 index at the open. The Trader Nicole Elliott reports.
TIP UPDATES:
Royal Dutch Shell (RDSB) posted some stomach-churning third-quarter figures, including a $6.1bn (£4bn) net loss based on the company's standard current cost of supplies (CCS) measure. Last year the equivalent quarterly figure was $5.3bn. The reported numbers include a tangle of write-downs and exceptional charges. The most positive piece of news chief executive Ben van Beurden could salvage was that "both net investments and dividends have been covered by operating cash flow over the last year, when oil prices have averaged $60 a barrel" - implying a repegging of long-term oil-price expectations similar to that seen at BP. We maintain our long-standing buy recommendation.
National Express (NEX) said like-for-like operating profits, excluding bid costs in rail and the Middle East, were 6 per cent higher year-to-date following constant-currency growth in every division in the crucial summer months. Like-for-like operating profits rose 7 per cent in the third quarter, with sales growth of 3.5 per cent in the flagship UK coach business. Buy.
Playtech (PTEC) shares rose 7 per cent in morning trading after the gambling technology company posted strong growth figures for the third quarter. Excluding acquisitions and currency movements, sales were up 17 per cent, and chief executive Mor Weizer said the gaming division "continues to enjoy double-digit underlying growth". Buy.
Barclays (BARC) shares fell 5 per cent in early trading after the company reported third-quarter pre-tax profits of £861m - 30 per cent down on the comparable. Importantly, however, those figures factor in foreign-exchange provisions, customer redress costs and losses on the disposals in Portugal and Spain. Net tangible assets were also up 10p at 289p. Buy.
Asset manager Henderson (HGG) announced net inflows of £1.3bn as private investors continued to buy its retail funds through the summer stock-market turbulence. Weaker stock prices nonetheless took their toll on assets under management, which fell from £82.1bn to £81.5bn over the quarter. Buy.
Electronics group Laird (LRD) reported a slowdown in the crucial US market in the third quarter, adding to evidence that the world's largest economy is stalling. Organic sales at constant currency are up 8 per cent for the year, but grew just 1 per cent in the summer quarter. The company announced a major overhaul of its manufacturing footprint, with pre-tax cash costs of up to $60m generating savings of at least $20m. Buy.
Optimal Payments (OPAY) shares fell 10 per cent after the payment provider admitted "a small amount of customers' personal data is in the public domain" following data breaches dating back to 2011 and 2012. The company noted that previous data breaches as a result of cyber-attacks in 2009 and 2010 had not subjected any customers to losses. We retain our buy call.
Shares in Trakm8 (TRAK) leapt 10 per cent after the vehicle telematics specialist announced a new contract with a major US-based data company. Management expects the customer to purchase more than 25,000 of its 'bluetooth low energy' devices - which wirelessly relay real-time journey data from vehicles to smartphones and tablets - within the next two years. Buy.
Telecoms titan BT Group (BT.A) added a record number of TV customers in the six months to 30 September. Together with strong growth in the mobile business, that drove revenues up 7 per cent in the consumer division and propelled the group's adjusted pre-tax profits up 5 per cent to £1.40bn. Buy.
KEY COMPANY STORIES:
Aviva (AV.) reported that the value of new business rose 25 per cent to £823m in the third quarter, driven by pensions and platform growth. In the company's general insurance business, the ratio of claims to income was lower, which management put down to efficiency and better weather. Even better, the integration of Friends Life is ahead of schedule, with £91m of synergies achieved against the £225m target.
Shares in Smith & Nephew (SN.) fell 5 per cent in morning trading following a disappointing third-quarter update from the orthopedics giant. Revenues dipped 4 per cent on a reported basis to $1.1bn, reflecting a 9 per cent adverse currency movement and only a marginal contribution from acquisitions.
Yesterday afternoon's third-quarter figures from GlaxoSmithKline (GSK) were better than expected thanks to strong sales of HIV and flu medicines. This offset further declines in respiratory sales, prompting a 3 per cent bounce in the share price. Profits were helped by rigorous cost control, with analysts suggesting these might be the first signs of a recovery for the group.
OTHER COMPANY NEWS:
The share price of Falkland Oil and Gas (FOGL) headed south after it released disappointing drilling results from the Humpback exploration well. The well encountered non-commercial quantities of oil and gas within a number of sandstone intervals, but the driller was unable to obtain fluid samples due to technical difficulties. FOGL will now evaluate the results to assess the prospects of the Diomedea fan complex and the rest of the southern licences.
Accident services provider Redde (REDD) signaled in an AGM statement that business remained buoyant in September and October. "Trading profits are ahead of our expectations," said management, paving the way for upgrades.
