LONDON MARKET OPEN: Shell moves higher as oil price rise boosts profit

(Alliance News) - London's FTSE 100 opened in the green on Thursday morning, lifted by oil major Shell, as other European stock benchmarks declined ahead of the latest monetary policy move from the European Central Bank.

The Frankfurt-based central bank announces its interest rate decision at 1315 BST, which will be followed by a press conference from the bank's president, Christine Lagarde. After the ECB, the Federal Reserve will make a rate decision next week Wednesday and the Bank of England a day after its US counterpart.

Setting the tone, and having given European stocks a boost on Wednesday afternoon, the Bank of Canada raised rates by a smaller-than-expected 50 basis points. The smaller hike gave hope that central banks are ready to ease off on monetary policy tightening.

"It has been perceived as a sign that maybe – but just maybe – a global policy pivot is approaching," Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said.

CMC Markets Chief Market Analyst Michael Hewson said: "The Bank of Canada's rate move yesterday was also significant in the context of the Reserve Bank of Australia's dovish hike earlier this month. Both have housing markets which are being hit hard by the current pace of rate hikes and US housing data has been in freefall in recent months. Could this housing weakness also feed into the Fed's deliberations as we head into year end."

The FTSE 100 index was up 15.47 points, or 0.2%, at 7,071.54. However, the mid-cap FTSE 250 was down 45.72 points, or 0.3%, at 7,071.54, and the AIM All-Share was down 2.47 points at 807.20.

The Cboe UK 100 was up 0.3% at 706.52, the Cboe UK 250 flat at 15,498.56, and the Cboe Small Companies was up 0.1% at 12,399.36

In European equities on Thursday, the CAC 40 in Paris was down 0.5%, while the DAX 40 in Frankfurt was 0.4% lower.

As the ECB takes centre stage, the bank's policy-makers continue to deal with sky-high inflation and surging energy costs, which will likely see the central bank carry out its third successive interest-rate hike - this one likely to be 75 basis points or more.

Analysts are all but convinced the bank will up rates by another 75 basis points, but some say there is room for a full percentage point raise - 100 basis points.

"Today really depends on not what the ECB delivers today, but what sort of guidance ECB President Christine Lagarde offers over future moves going forward for December, at a time when EU inflation is still showing little sign of slowing," Hewson said.

Swissquote's Ozkardeskaya added: "A 75bp hike, and a hawkish statement from Christine Lagarde will likely keep the euro upbeat above parity, as long as the US dollar remains soft."

The euro traded at USD1.0061 early Thursday, steady on USD1.0064 late Wednesday.

The pound was, just barely, holding above USD1.16 on Thursday morning. Sterling was quoted at USD1.1601, down from USD1.1612 at the London equities close on Wednesday.

In London, oil producer Shell added 3.4%.

Shell announced net profit totalling USD6.7 billion in the third quarter, after oil prices surged, improving from a loss after tax of USD447 million in the same period last year.

Chief Executive Ben van Beurden said: "We are delivering robust results at a time of ongoing volatility in global energy markets. We continue to strengthen Shell's portfolio through disciplined investment and transform the company for a low-carbon future. At the same time we are working closely with governments and customers to address their short and long-term energy needs."

Flush with cash, Shell said it will buy back USD4 billion of its shares.

The latest profit was however far less compared with its second-quarter net income totalling USD18 billion. Shell alerted the market on the comparison earlier this month, blaming the drop on a slump in refining margins.

Although oil and gas prices have surged from a year ago following the invasion of Ukraine by major energy producer Russia, hydrocarbon values are cooling as the northern hemisphere experiences mild temperatures and countries shore up supplies.

Shell last month announced that van Beurden will step down as CEO at the end of the year, as the energy major looks to reinvent itself under renewables boss Wael Sawan.

Peer BP advanced 2.3%.

Brent oil was trading at USD93.39 a barrel, soft from USD93.93 late Wednesday.

Lloyds Banking gave back 1.9%.

The lender said its third quarter was "robust", thanking its income growth, balance sheet "momentum" and "resilient" customer focus.

In three months to September 30, pretax profit slumped 26% to GBP1.51 billion from GBP2.03 billion.

The bank set aside GBP668 million in the quarter as underlying credit impairments to handle the fallout from increased bad loans, reversing from the GBP119 million gain recorded the year prior.

Net income was up 13% to GBP4.59 billion from GBP4.08 billion, as underlying net interest income rose 19% to GBP3.39 billion from GBP2.85 billion, but other income was down 4% to GBP1.28 billion from GBP1.34 billion.

Aiding its income growth, Lloyds's banking net interest margin improved to 2.98% from 2.55%. Looking at 2022 as a whole, the bank said its NIM will top 2.90%.

Anglo American shed 2.3%. The miner's copper and platinum metals production fell by 6% in the third quarter, with iron production down 5% as Anglo lamented a "challenging operating environment".

Copper production was down to 147,000 tonnes, while platinum slipped to 1.05 million ounces. iron was down to 16.1 million tonnes.

By contrast, output of steelmaking coal increased by 28% to 5.5 million tonnes.

"As we move through the final quarter, we are focused on maintaining this operational momentum to deliver our full year guidance," Anglo said. "The continued safe ramp-up of our steelmaking coal operations, as well as further performance improvements at our iron ore businesses, are priorities to set the platform for delivery into next year."

Mining peers Rio Tinto 1.7% and Antofagasta 1.1% lost.

It was a mixed close for stocks in the US on Wednesday, with the tech-heavy Nasdaq taking a hit from disappointing tech earnings. The Dow Jones Industrial Average closed up slightly, and the S&P 500 index closed down 0.7%, but the Nasdaq Composite lost 2.0%.

Facebook-owner Meta Platforms lost 20% in after-hours trade in New York after the release of its earnings. The stock already had lost 5.6% in the regular session on Wednesday, amid share tumbles for peers Alphabet and Microsoft, closing down 9.1% and 7.7%, respectively. The pair also had disappointed with the quarterly results, released late Tuesday.

Meta, reported, for the three months that ended September 30, its revenue fell 4% to USD27.71 billion from USD29.01 billion a year before. Income from operations dropped 46% to USD5.66 billion versus USD10.42 billion. Net income was USD4.40 billion, down 52% versus USD9.19 billion.

Investors will now be keenly anticipating figures from Amazon and Apple after the closing bell in New York on Thursday.

In Asia on Thursday, stock markets were mixed.

The Shanghai Composite closed down 0.6% but the Hang Seng index in Hong Kong advanced 0.8%. The Japanese Nikkei 225 index ended down 0.3%. The S&P/ASX 200 stock index in Sydney closed up 0.5%.

Against the yen, the dollar was quoted at JPY145.71, down from JPY146.50.

Gold was quoted at USD1,661.60 an ounce early Thursday, lower from USD1,665.70 on Wednesday evening in London.

Aside for the ECB, the economic calendar also has a US gross domestic product reading at 1330 BST.

By Paul McGowan; [e-mail]

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