The FTSE 100 closed negative territory on Tuesday as investor attention shifted to the United States and China as the manufacturing sectors in both countries slowed.

ISM US manufacturing data slowed more than expected in July reviving fears about a possible US recession. Meanwhile, investors in natural resource companies grew tired of China’s lack of action on stimulus.

China has been hinting at unleashing a wave of stimulus which is yet to materialise. A fourth month of declines in manufacturing activity had some hoping China would announce firm steps to boost the economy. China instead made unconvincing comments they were considering a range of measures.

The FTSE 100’s natural resource companies have enjoyed recent support from China stimulus hopes, but this waned on Tuesday.

The US manufacturing sector was also showing signs of weakness as ISM Manufacturing data for July missed expectations with a reading of 46.4 versus estimates of 46.8. A reading below 50 signifies contraction.

US stocks fell in the immediate reaction to the ISM release, and already weak European stocks jumped on the tailcoats and closed the session in the red.

The FTSE 100 closed down 0.4% at 7,666.

BP

BP had started the day higher after announcing a 10% dividend increase and a $1.5bn share buyback. However, the stock fell in line with natural resources as disappointment about China’s stimulus took hold.

“BP has been unable to escape the heavy blow to profits dealt by lower commodity prices this earnings season, and investors will be disappointed by today’s earnings miss. As a result, BP has unashamedly pushed shareholder returns to the top of its priority list, and has scope to continue raising the dividend over the rest of the year even if oil prices come under further pressure. It was pleasing to see this come without a cut to guidance on capital investment,” said Derren Nathan, head of equity analysis at Hargreaves Lansdown.

There are significant projects in the pipeline both in economically attractive oil fields, such as phase 2 of the Mad dog project in the Gulf of Mexico, and entry into the European offshore wind market. BP needs to keep the pace of investment high if it wants to sustain growth in shareholder returns, and develop resilience against oil price volatility over the longer term.”

HSBC

HSBC was among the top risers after releasing rising profits in the first half due to higher interest rates and the reversal of an impairment charge related to French operations.

“HSBC’s results got the thumbs-up from investors thanks to bumper profits and news of another $2 billion share buyback, having already completed one this year,” said Laith Khalaf, head of investment analysis at AJ Bell.

Floorcoverings supplier Victoria (LON: VCP) says first quarter trading is in line with expectations and margins are improving. The integration of recent acquisitions is progressing. The results for the year to 1 April 2023 will be published on 15 August. The share price increased 9.45% to 718p.

Shares in EngageXR (LON: EXR) have recouped some of their losses from earlier in the year. The extended reality company grew interim revenues by 18%. Net cash is €9.4m and that should be enough to enable the company to achieve cash generation in 2025. The share price recovered 9.09% to 3.6p.

Crete resort developer Minoan Group (LON: MIN) has signed an initial agreement with a major international hotel operator, which will run one or more hotels at the resort. Design and specification work will commence.  The share price rose 7.69% to 1.05p.

A strong second half performance by System1 (LON: SYS1) nearly made up for the decline in first half revenues. Full year revenues were still down from £24.1m to £23.4m.  The market research business reported a two-fifths fall in underlying pre-tax profit to £600,000, but Canaccord Genuity has upgraded its 2023-24 forecast to £900,000. The share price is 7.58% higher at 177.5p.

FALLERS

Wishbone Gold (LON: WSBN) has raised £1.42m at 2.4p/share. That compares with the initial target of £1m. The share price fell 18.1% to 2.425p. The cash will be used to fund exploration at Red Setter and Cottesloe in Australia.  

Shares in IOG (LON: IOG) continue to decline following yesterday’s announcement that it is near to agreeing a further waiver of the interest payment on the €100m senior secured bond. IOG originally announced a delay of the payment due on 20 June to 31 July. Talks are at an advanced stage to extend the payment date again, but there is no news about an agreement. This is required because IOG could go into administration if there is a default on the bond. The share price fell 13.9% to a new low of 1.825p.

United Oil & Gas (LON: UOG) is in talks with Quattro Energy concerning the conditional sale of the UK Central North Sea licence P2519, which includes the Maria discovery and was due to complete on 31 July. Not all the conditions of the sale have been met yet. The share price slid 12.5% to 1.225p.

Video games services provider Keywords Studios (LON: KWS) increased interim revenues by 19% to €383m with organic growth of 10%. Operating profit was 5% ahead at €59m as margins decline to more normal levels. There has been limited impact from the directors and actors strikes in Hollywood. Trading is mixed with marketing and support services hit by delays. The share price declined 10.2% to 1582p.

Although revenues fell at Filtronic (LON: FTC) it is winning new orders and diversifying its customer base. There was a greater proportion of lower margin 5G equipment revenues with component shortages hitting some areas of the business. There were also initial revenues from space. Full year revenues dipped from £17.1m to £16.3m, while underlying pre-tax fell from £1.5m to around £100,000. Contracts won will increase revenues this year and pre-tax profit is expected to recover to £800,000. The share price has risen strongly in recent weeks on the back of contract news, so it is not a surprise that there has been some profit-taking. The share price slumped 11.4% to 15.5p, but it is still 12% higher than at the end of 2022.

BP shares were ticking higher on Tuesday morning as the oil giant announced increased returns to shareholders through a 10% increase to their dividend and a $1.5bn share buyback.

As expected, BP’s profits have been curtailed by lower oil prices with replacement cost profit falling to $2.6bn in Q2 2023 from $5bn in Q1. BP recorded $8.5bn replacement cost profit in Q2 2023 in the immediate aftermath of Russia’s invasion of Ukraine.

Despite much lower profits, BP’s cash generation was resilient with $6.2bn in operating cash flow, although surplus cash flow swung into negative territory as BP pushed forward with shareholder returns.

Derren Nathan, head of equity analysis at Hargreaves Lansdown, suggested BP would continue to increase dividends despite lower oil prices:

“BP has been unable to escape the heavy blow to profits dealt by lower commodity prices this earnings season, and investors will be disappointed by today’s earnings miss. As a result, BP has unashamedly pushed shareholder returns to the top of its priority list, and has scope to continue raising the dividend over the rest of the year even if oil prices come under further pressure. It was pleasing to see this come without a cut to guidance on capital investment.”

There are significant projects in the pipeline both in economically attractive oil fields, such as phase 2 of the Mad dog project in the Gulf of Mexico, and entry into the European offshore wind market. BP needs to keep the pace of investment high if it wants to sustain growth in shareholder returns, and develop resilience against oil price volatility over the longer term.”

BP shares were 1.1% higher at the time of writing.

Belluscura shares jumped in opening trade on Tuesday after the portable oxygen unit company said they had signed an agreement with McKesson Medical-Surgical, a division of McKesson.

McKesson is the world’s largest drug distribution company and the 9^th largest company by revenue in the US. Belluscura’s X-PLOR® portable oxygen concentrator is now available through McKesson Medical-Surgical’s online distribution channels.

Belluscura shares were over 9% higher at the time of writing on Tuesday.

“We are very pleased that McKesson, one of the largest distributors of pharmaceuticals and medical devices in North America, has chosen the X-PLOR to be offered through their catalogue,” said Robert Rauker, Chief Executive Officer, Belluscura plc.

“This significant distribution agreement will mean that more Americans can purchase our devices throughout the country, broadening our product distribution and making supplemental oxygen more easily accessible.”

Belluscura was founded and subsequently floated on AIM by Tekcapital, who retain an 11% stake in the company.

Tekcapital’s portfolio companies include Belluscura, MicroSalt, Innovative Eyewear and Guident. MicroSalt appointed Zeus Capital as their NOMAD for an AIM listing in late 2022.

Tekcapital’s portfolio companies have been busy expanding commercial partnerships and enhancing their intellectual property this week. After yesterday’s news that MicroSalt were expanding into Asia, Tekcapital announced Innovative Eyewear was launching a new transitional blue light-blocking lens on Tuesday.

The lens provides additional eye protection across varied environments without changing eyewear.

Today’s announcement follows the launch of ChatGPT functionality across the Lucyd smart eyewear range earlier this year, allowing Lucyd users to access Generative AI through a voice interface built into Lucyd’s smart eyewear.

“I am thrilled to announce another engineering feat from our dedicated team, who are always striving to help our customers get the most out of the glasses they wear every day,” said Harrison Gross, CEO of Innovative Eyewear Inc.

“The new Blueshift lens makes our eyewear suitable for use in almost any environment and at any light level. We believe this lens is an important enhancement for all-day wearability, allowing the user to seamlessly shift from blocking harmful blue light during computer and phone use, to enjoying driving and outdoor activities comfortably in high sunlight. We believe this exciting new upgrade, in tandem with our recently released Lucyd app which made our eyewear the first to be ChatGPT-enabled, further expands the tech advantages of Lucyd Eyewear over competing products.”

In addition to Innovative Eyewear’s new lens announcement, Tekcapital investors will be pleased to learn AIM-listed Belluscura shares surged after announcing they had signed a deal with McKesson Medical-Surgical, a division of McKesson, the 9^th largest company by revenue in the US.

Premier African Minerals shares surged higher on Monday after they announced their negotiations with offtake partners Canmax are nearing a ‘satisfactory resolution’ after Canmax issued a termination notice.

Termination of the agreement would require Premier African Minerals to return the prepayment amount of $34.6m, plus interest, within 90 days.

Premier African Minerals shares were 15% higher at the time of writing on Monday on hopes such a scenario will be avoided.

Investors will also be pleased to note improvements to the processing procedures at their Zulu lithium plant will enable the production of SC6-grade lithium.

The failure to deliver the required lithium offtake to Canmax resulted in them issuing their termination notice. The suggestion these targets can now be met will strengthen Premier African Minerals’ hand in negotiations with their partner.

“I am deeply appreciative to our team at Premier and the team from Canmax for the work being undertaken in an effort to find a satisfactory outcome,” said George Roach, CEO of Premier African Minerals.

“In regard to Spodumene concentrate production, it is most encouraging to note that we are able to produce high-grade spodumene concentrates from the plant material in our laboratory and to note that we expect to re-float concentrates produced to date with the intention of having saleable material in the coming weeks.”

North Sea oil and gas company IOG (LON: IOG) says it believes that it is near to a further waiver of the interest payment on the €100m senior secured bond. This is required because IOG could go into administration if there is a default on the bond.

Shareholders remain jittery and the share price has slumped by one-quarter to 2.125p. That is an all-time low.

AIM-quoted IOG originally announced a delay of the payment due on 20 June to 31 July. Talks are at an advanced stage to extend the payment date again, so that the company can put in place a way of coping with its stretched balance sheet.

Gas prices remain weak while the Blythe H2 gas rate has declined to 26mmscf/day. finnCap forecasts a slump in revenues from £75.4m to £26.7m, which would push IOG into loss. Net debt of £96.5m is forecast for the end of 2023 with cash falling to £1m, compared with £20.3m at the end of June 2023. That indicates the working capital concerns.

Scancell shares were 10% higher in earlier trade on Monday after releasing positive news on their ModiFY trial.

Scancell said their ModiFY trial had received approval from the safety review committee to expand to study after the most cohort of patients presented no safety concern and one patient displayed regression.

Scancell is conducting trials of their Modi-1 therapy for patients with renal or head and neck cancers who are also using checkpoint inhibitors. Scancell will now expand the trial across two further cohorts of 21 people each.

The company has also been permitted to recruit 30 people into the neoadjuvant arm of the Modi-1 trial.

Prof Lindy Durrant, Chief Executive Officer, Scancell, commented: 

“This is an important milestone for the Company as we now have approval to treat patients with Modi-1 monotherapy or in combination with a CPI in four different tumour types either pre- or post-tumour resection. The  information extracted from this study will be invaluable in defining the patient population that will benefit the most from our cancer vaccine, Modi-1.”