There was mild optimism in equities on Thursday after several days of soggy trade dragged on the FTSE 100 and major US equity indices as corporate updates took centre stage.
Getting the European session off to a good start, Tesla shares surged in the US premarket on strong growth in key lines that was felt in US futures overnight. This was built on Thursday morning by a string of upbeat releases from London-listed companies.
Strong earnings releases by the London Stock Exchange Group, Barclays, and Unilever and firmer oil prices helped London’s leading index increase 0.5% to 8,299.
“Higher oil prices and some good corporate results helped UK stocks to strong gains on Thursday morning,” said AJ Bell investment director Russ Mould.
“Oil was higher amid continuing tensions in the Middle East with observers wary of an impact on supply. This lifted heavyweight energy stocks BP and Shell and their significant weighting in the FTSE 100 meant the index slightly outperformed other European indices.”
Barclays
Barclays was among the top risers with a gain of 3% after following Lloyds in releasing better-than-expected earnings largely driven by lower provisions for bad debts.
Investors were rightly concerned going into the banking earnings season with lower interest rates threatening to erode profits. While lower interest rate have softened the top line, analysts seem to have overegged the negative impact of impairment charges, which has led to banks beating on earnings.
“Barclays has squeezed out a profit beat after better-than-expected impairments and a good grip on costs,” said HL’s Matt Britzman.
“We’re always treated to a different perspective when Barclays reports, with US credit card and investment banking performance differentiating it from more UK-focused peers. On the US card front, after a period of edging higher, default rates look to have stabilised at relatively low levels.
“The slight disappointment comes from investment banking, where Barclays didn’t quite deliver the knockout performance that some might have hoped for in its trading division, especially after its US peers saw booming activity over the same period. The positive news is that investment banking profits were in line with expectations, and there was strong growth in fees & underwriting from the lulls of last year.”
“This should be taken as a decent set of results, but Barclays has had a material re-rating over the year so far. Much of that’s been justified, and the stock still looks to be trading at a discount to where it should be. However, the lack of visibility over the large investment banking division and how it meets medium-term growth targets is an anchor keeping things down”
Unilever shares enjoyed stronger-than-expected Q3 results, rising a little over 3%. Unilever announced a 4.5% increase in sales for its power brands, which account for more than 75% of group sales.
“A little over a year into the job and CEO Hein Schumacher has made genuine progress with the business. This is reflected in today’s slightly better-than-expected third-quarter sales,” Russ Mould said.
“This performance has been built on improved product innovation but also slowing down price increases. This helps explain why the company expects margin progression to slow overall in the second half of the year.
“Unilever faces a tricky balancing act between protecting its profitability and not alienating shoppers. This is a particular risk in developed markets where customers have the option of trading down to generic alternatives but less of an issue in emerging economies where these kinds of options are not readily available.”
Investors will hope the worst of Unilever’s troubles are behind them.