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FTSE 100 movers: Defensives provide lift as Shell, Barclays weigh
(WebFG News) - The FTSE 100 was fairly flat on Thursday as gains for the likes of Evraz and Imperial Brand offset the considerable weight of stocks going ex-dividend and Shell shares slipping.
Evraz led the risers, with the Russian steelmaker's first-quarter trading update helping the shares continue a rally that began a earlier after they had fallen around 19% since economic sanctions were imposed on several oligarchs earlier in the month.
The first quarter numbers were not that impressive, with total crude steel production of 3.36m tonnes down 5.5% on the fourth quarter of 2017 and 8.7% lower than the first. The second quarter however, is expected to see crude steel output rise slightly on the first.
Cigarette maker Imperial Brands shares were higher a day after a trading update from rival BAT.
Water companies United Utilities and Severn Trent were higher despite a highly critical report that blamed the industry for a lack of investment that could mean a drought in coming summers would see large parts of the country having their water cut off. The National Infrastructure Commission blamed a lack of investment by the water industry, piling further pressure on a sector under fire from regulator Ofwat. The report called for compulsory metering, in which households are charged for what they use, to cut demand.
This defensive trio, payers of sizeable dividends, were joined by Centrica and National Grid as these bond proxies benefitted from investor rebalancing after bond yields gained new highs this week but retreated slightly on Thursday.
Centrica shareholders were no doubt noting the merger of rivals SSE and Npower coming up for further scrutiny after the Competition and Markets Authority's initial Phase 1 investigation found that the rivalry between the large energy companies was an "important factor" in how they set tariffs.
Late first-quarter results from Shire gave its shares a lift as a good start to 2018 was seen with sales up 7% to $3.6bn (£2.6bn). The increase was driven a 10% increase to $2.7bn in sales of treatments for rare diseases in fields such as immunology and haematology, while neuroscience sales fell 2% to $918m. Net debt was down $866m to $18.2bn in the quarter.
Analyst Nicholas Hyett at Hargreaves Lansdown said it was a good set of numbers from Shire, with sales of the group's relatively young drug portfolio expanding rapidly, with growth across a wide range of treatment areas, good cost control and falling debt.
"Unfortunately, the numbers aren't going to attract the attention they arguably deserve, because the real focus is on the looming Takeda deal. Although the Japanese pharmaceutical group has yet to make a formal offer, with Shire's board prepared to support the most recent proposal a deal now looks more likely than not."
The main weight on the blue chip index was from several shares going ex-dividend, led by Legal & General, Fresnillo, Antofagasta, Glencore and Rolls-Royce.
Royal Dutch Shell was sold as it said less favourable refining market conditions in the first quarter and lower contributions from trading impacted the earnings of the downstream business. Group income was up thanks to better oil and gas prices and growth from its gas and upstream businesses but operating cash flow of $9.6bn came in below the $10bn-plus estimate after a $500m derivative impact at the integrated gas arm.
JP Morgan was one of those disappointed, estimating that Shell's cash dividend breakeven in the quarter was at a crude price of $66 per barrel, which is much higher than the $52 last year, blamed on weaker refining, increased cash margins and working capital expansion.
Barclays was down around 1.5% by mid-afternoon as the bank saw revenue down 8% and booked another statutory loss as costs linked to past misconduct obscured a solid underlying profit. Barclays also began to set out its case against activist investor Edward Bramson by promising to return more cash to shareholders and highlighting the virtues of its diverse business.
"The US Justice Dept's $1.4bn fine also dragged Barclays' key capital buffer 60 basis points lower to 12.7%, not sufficient to raise concerns about the recent full revival of its dividend, but not a comfortable situation either," said Ken Odeluga, market analyst at City Index.
"Still mild shareholder applause was offered due to underlying profits pacing expectations and the additional headroom this implied for CEO Jes Staley's dual UK retail and international investment bank strategy to be vindicated."
Market Movers
FTSE 100 (UKX) 7,381.94 0.04%
FTSE 250 (MCX) 20,067.13 0.24%
techMARK (TASX) 3,395.93 0.32%
FTSE 100 - Risers
Evraz (EVR) 435.30p 3.27%
Imperial Brands (IMB) 2,541.50p 2.81%
GKN (GKN) 454.90p 2.57%
United Utilities Group (UU.) 732.60p 2.49%
BT Group (BT.A) 243.85p 2.01%
Severn Trent (SVT) 1,907.00p 2.01%
Smurfit Kappa Group (SKG) 3,070.00p 1.99%
WPP (WPP) 1,137.84p 1.91%
National Grid (NG.) 821.20p 1.90%
Centrica (CNA) 149.80p 1.77%
FTSE 100 - Fallers
Legal & General Group (LGEN) 267.00p -4.09%
Fresnillo (FRES) 1,245.00p -2.51%
Direct Line Insurance Group (DLG) 365.70p -2.40%
Antofagasta (ANTO) 937.20p -2.38%
Royal Dutch Shell 'A' (RDSA) 2,470.50p -2.29%
Royal Dutch Shell 'B' (RDSB) 2,531.50p -2.18%
Glencore (GLEN) 369.80p -1.96%
Taylor Wimpey (TW.) 189.60p -1.69%
Admiral Group (ADM) 1,970.00p -1.60%
Anglo American (AAL) 1,655.80p -1.15%