FTSE 100 set to close out the week in strong fashion

Liam Roche
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FTSE 100 set to close out the week in strong fashion

The FTSE 100 appears to be closing off a decent week in fine fashion as it set aside concerns of a Delta variant linked sell-off in Asia. The UK index added 0.35% on Friday, standing at 7,218 points at the time of writing.

“However, the closure of Chinese ports in an effort to control the spread of the more infectious Covid strain could add to global supply chain disruptions and become something the market cares about in fairly short order,” warned AJ Bell financial analyst Danni Hewson.

“For now UK stocks are taking their cue from the US, where the S&P 500 closed at a record high for a third consecutive day. Entertainment giant Disney demonstrated the increasing power of its huge library of content as it unveiled a better-than-expected quarterly performance.”

The blue-chip Dow and the S&P 500 are on course to close out a strong week after adding 0.8% and 0.6%, respectively, through Thursday at record highs.

The FTSE 250 is also on the up, remaining around the all-time high reached yesterday, up 0.18% at 23,790.

FTSE 100 Top Movers

Rolls-Royce (1.77%), Flutter Entertainment (1.47%) and Intermediate Capital Group (1.34%) are leading the way atop the FTSE 100 as the week draws to a close, each making modest gains.

At the lower end, Fresnillo (-1.72%), Auto Trader (-0.98%) and Phoenix Holdings (-0.98%), have all lost ground.

Airbnb enjoys strong Q2 but warns of impact of Delta variant

Liam Roche
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0
Airbnb enjoys strong Q2 but warns of impact of Delta variant

In after-hours trading the Airbnb share price dipped by around 3%

Airbnb reported robust growth in revenue for the quarter as people from countries with higher vaccination rates brought about a recovery for the travel sector.

However, the short-term rental company also warned of the potential spread of the Delta variant of coronavirus and its impact on booking levels for the remainder of the year.

“As we exit the second quarter and come into the third, we have a combination of fewer bookings for the fall, just given the nature of some of the seasonality and any kind of impact potentially on COVID concerns,” Chief Financial Officer Dave Stephenson said on a post-earnings call with investors.

In after-hours trading, the Airbnb share price dipped by around 3%, as investors took onboard the update.

Between April and July Airbnb enjoyed a positive period as people became more comfortable travelling long distances thereby using the company’s services.

Destinations where the vaccine roll-out was successful saw a specific rise in the number of bookings.

Airbnb’s revenue stood at $1.34bn for the second quarter, four times higher than in 2020, and 10% more when compared to the same period in 2019.

Hotels and similar types of businesses were battered by the pandemic last year as restrictions on travel made it impossible to operate.

Airbnb adapted well by focusing on offering longer-term rentals as people moved to work from home in a more convenient way.

The company is expecting to report record Q3 adjusted income before interest, taxes, depreciation and amortization (EBITDA) and margin.

Oil prices slide as Goldman Sachs says OPEC+ unlikely to raise production levels

Liam Roche
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0
Oil prices slide as Goldman Sachs says OPEC+ unlikely to raise production levels

News follows calls by White House on OPEC and its allies to raise its levels of oil output

Goldman Sachs said the USA’s plea to OPEC+ to increase output is unlikely to bring about higher production levels in the short-term as the Delta variant remains a threat to demand.

Earlier this week, the White House called on OPEC and its allies to raise its levels of output in a bid to keep rising fuel prices under control, as inflation in America reaches its highest yearly growth rate in 13 years.

“We don’t see the recent White House statement as threatening the current market deficit nor the pace of the rebalancing in 2H21,” Goldman Sachs said in a note dated Thursday.

The investment bank maintained its end-of-year forecast for Brent crude oil at $80 per barrel.

Oil prices slid on Friday, with Brent crude 0.8% lower at $70.74 a barrel, while US crude down almost 1% to $68.44 a barrel.

Goldman also said that an additional increase in OPEC+ production by the end of the year is required to balance out recent supply issues across the world. The investment bank expects OPEC+ spare capacity to return to normal levels by spring 2022.

OPEC and its allies reached an agreement in July to increase oil supply in an effort to keep soaring crude oil prices under control.

The group’s plan is to pump an additional 400,000 barrels per day each month during August, increasing output by 2m barrels per day by the end of 2021. 

“Looking beyond the Delta headwind, we expect the demand recovery to continue alongside rising vaccination rates,” Goldman Sachs said.

Second upgrade in three months for Empresaria

Andrew Hore
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Second upgrade in three months for Empresaria

Empresaria (LON:EMR) has sparked a second forecast upgrade in three months following its interim figures. The international recruitment firm has reduced its cost base and operational gearing means that profit can recover rapidly.
The share price jumped 11.5p to 92.5p, which is still not much more than 50% of the high in the past decade, which was hit back in 2017.
In the six months to June 2021, net fee income was flat at £28.4m and underlying pre-tax profit jumped by two-thirds to £4m. Profit improved in all geographic regions. Earnings more than doubled to 4.1p a share.
Healthcare generated ...

New AIM admission: Southern Energy Corp seeks higher profile

Andrew Hore
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New AIM admission: Southern Energy Corp seeks higher profile

Oil and gas producer Southern Energy Corp concentrates on areas with proven low-cost producing assets, with the current focus in Mississippi. The strategy is to grow production through acquisitions.
Alberta-based Southern Energy plans to increase production to 25,000 barrels of oil per day over the next two year. This will require larger acquisitions than in the past.
Cash is being generated, but there is also substantial debt. That means that share issues, whether it will be to pay for acquisitions or to raise cash, will be likely. That is why Southern Energy wanted to join AIM.  
The sh...

What can be expected from BHP’s full-year results?

Liam Roche
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0
What can be expected from BHP’s full-year results?

The BHP share price (LON:BHP) is trading close to an all-time high. This is because of hopes for “a post-pandemic economic recovery, commodity price strength and the company’s own capital discipline”, said AJ Bell investment director Russ Mould.

These factors have allowed the company to rein in capital investment and acquisitions, sell assets and pay down debt.

While the FTSE 100 company has six main product areas, iron ore and copper are the two that continue to contribute overwhelmingly to its profit levels.

Source: Company accounts

Analysts’ Consensus Forecasts

Analysts are expecting sales of $59bn for BHP‘s full-year results, compared to $43bn for the same period a year before. For the year beginning analysts have predicting sales of $63bn.

Operating profit for the full-year is expected to double to $30bn, along with an additional increase to $35bn in 2022.

Source: Company accounts, Marketscreener, consensus analysts’ forecasts

Analysts are expecting a doubling of earnings per share (EPS) to $3.15, with a further one-third advance in the coming year to $4.41.

Finally, a dividend of $2.89 against $1.20 a year ago, with a further increment to $3.34 expected in the coming year.

“That means BHP is expected to show the greatest dividend growth in sterling terms of any firm in the FTSE 100 between 2020 and 2022 and is enough to leave the stock on a double-digit forward yield,” said Russ Mould.

A question mark remains over whether the current earnings and dividend success is sustainable. Analysts do not appear to think so.

“They have sales, profits, earnings per share and dividends falling in the year to June 2023, which is in keeping with central banks’ view that current price inflation is ‘transitory,’ and the result of a post-lockdown surge in demand, production bottlenecks and shipping shortages,” said Russ Mould.

Capital Expenditure and Net Debt

Two final numbers to watch are capital expenditure and net debt. Net debt ended the first half at $11.8bn, the very bottom of the company’s $12 to $17bn target range. Capex was forecast to be $7.3bn in fiscal 2021, while the last published budget for 2022 was $8.5bn.

Source: Company accounts, Marketscreener, consensus analysts’ forecasts, management guidance

Rio Tinto share price dives on ex-dividend date as excitement builds over new commodity

Liam Roche
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0
Rio Tinto share price dives on ex-dividend date as excitement builds over new commodity

Rio Tinto Share Price

The London-listed Rio Tinto share price (LON: RIO) is down by 7.21% during the afternoon session on Thursday, and is the day’s worst performing stock on the FTSE 100. To the relief of investors in the mining giant, the move is a result of the company’s stock trading ex-dividend. If one purchases a stock on its ex-dividend date or after, they will not be entitled to the next dividend payment. Therefore the value of the Rio Tinto share price fell today, and not due to any performance related issues within the company.

Aside from the ex-dividend date passing there is other news which could set the miner on a better path, following what has been an underwhelming 2021 so far. Year-to-date the Rio Tinto share price is now down by 3.56%.

Finances

Rio Tinto revealed record half-year profits that surpassed its total for all of 2020 its key commodity, iron ore, reached an all-time high. Rio said pre-tax profits increased by 240% to a record $18bn in the half-year to June on revenues of $33bn. Additionally, the FTSE 100 miner swung to a net cash position of $3.1bn from net debt of $664m at the beginning of the year.

Rio’s chief executive Jakob Stausholm didn’t get carried away with the results, suggesting good fortune of rising commodity prices helped. “We have seen significant price hikes and fortunately we have reaped the benefit from it,” he said. “But there a still a number of things that can be done better.”

Stausholm also suggested that the high price of iron ore would not last forever. “We never give price predictions on price but I would always say that when the iron price is above $200 a tonne it is not sustainable . . . it is bound to reduce.”

Fortunately for the Rio Tinto share price, there could be another commodity to help take the burden off of iron ore.

Jadarite

Rio Tinto is doing its best to position itself to profit as internal combustion engine vehicles get replaced over the remainder of this decade. One way the company will look to do this is via a little-known commodity called ‘jadarite’.

Back in 2004 the mining giant discovered the substance, named after the Jadar valley in Serbia, a high-grade mineral compound of lithium and borates which has never been located anywhere else.

While lithium is vital to the production of lithium-ion electric batteries, Borates are contain salts known as boron, which is used in fertilisers, and also materials for solar panels and wind farms.

Rio Tinto has allocated £1.7bn to a site close to the radar river in an effort to extract the commodity after it figured out how to process the compound economically and at scale.

The miner said the site could allow the company to become Europe’s biggest supplier of lithium for the next 15 years. Rio expects to be able to extract 58,000 tons of jadarite per year, enough for 1m electric car batteries.

For those with eyes on the Rio Tinto share price, this could be an interesting development to watch unfold, and could boost the miner’s balance sheet for years to come.

White House calls on OPEC+ to act to keep fuel prices under control

Liam Roche
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0
White House calls on OPEC+ to act to keep fuel prices under control

White House

The US government has called on OPEC and its allies to raise its levels of output in a bid to keep rising fuel prices under control, as inflation in America reaches its highest yearly growth rate in 13 years.

While OPEC+ has recently increased its production levels, the White House is calling on the oil producing nations to do more, saying that not doing so could put the world recovery from the pandemic in doubt.

OPEC and its allies reached an agreement in July to increase oil supply in an effort to keep soaring crude oil prices under control.

The group’s plan is to pump an additional 400,000 barrels per day each month during August, increasing output by 2m barrels per day by the end of 2021.

The monthly increases will rise next year, as OPEC+ confirmed it has extended the deal from April next year to December 2022.

However, Jake Sullivan, Biden’s national security adviser, said that “while Opec+ recently agreed to production increases, these will not fully offset previous cuts imposed during the pandemic until well into 2022.”

Inflation

The price of goods and services in America rose again in July, albeit in line with analysts’ expectations, on high levels of pent-up demand.

The consumer price index increased by 5.4% in July year-on-year, as reported by the Labor Department, in a continuation of the levels seen in June.

The Federal Reserve, however, is reaffirming its position that inflation is transitory.

Oil Prices

At the beginning of the year, Brent crude oil was sitting just above $50, whereas at the time of writing, is valued at $71.35.

The comments by Jake Sullivan accompanied a rise in the price of Brent crude oil, the international benchmark, by 1.2% per barrel in New York yesterday evening.

Prior to that, oil prices showed some signs of steadying as the Delta variant looks set to impact the global economic recovery.

But other factors may come into play which would keep the price of oil down at least somewhat.

The International Energy Agency (IEA) has said that increased demand for oil reversed its path last month and will now move more slowly for the remainder of the year.

“Growth for the second half of 2021 has been downgraded more sharply, as new COVID-19 restrictions imposed in several major oil consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the Paris-based IEA said.

FTSE 100 slips but remains in touching distance of post-pandemic highs

Liam Roche
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0
FTSE 100 slips but remains in touching distance of post-pandemic highs

The FTSE 100 was modestly lower, down 0.12% to 7,211.74, in early trading as weakness in the mining sector overshadowed some decent UK economic data.

However, the index remains above the 7,200 mark and is in touching distance of yesterday’s post-pandemic highs.

AJ Bell financial analyst Danni Hewson noted that “Rio Tinto shares slumped heavily as they traded without entitlement to a pretty generous dividend.”

“For now there appear few big catalysts to shift the index in either direction amid a lull in major corporate and economic updates – however that’s often when something emerges from leftfield to upset the apple cart,” Hewson added.

FTSE 100 Top Movers

Aviva (3.98%), Polymetal International (1.93%) and Hargreaves Lansdown (1.85%) lead the way on the FTSE 100 on Thursday.

While at the other end, Rio Tinto (-7.21%), Evraz (-6.38%) and Legal and General (-1.68%), were dragging the FTSE 100 back.

GDP surged by 4.8% between April and June as UK consumers played their role

Liam Roche
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0
GDP surged by 4.8% between April and June as UK consumers played their role

Sunak says today’s figures show that UK economy is on the mend

UK GDP grew by 4.8% between April and June, it was revealed on Thursday, as most businesses are at least beginning to find their feet again as lockdown restrictions have been eased.

The Office for National Statistics showed that the expansion of the UK economy came about thanks to retail, restaurants and the hotels sector.

The official GDP figure did, however, fail to meet the Bank of England‘s expectations of 5%.

Compared to before the pandemic, the UK economy is now 4.4% smaller.

Commenting on UK GDP showing a positive uptick and an encouraging economic outlook, Douglas Grant, Director of Conister, part of AIM listed Manx Financial Group, said: “Today’s UK GDP data shows a positive uptick quarter on quarter and provides a more encouraging outlook for the UK economy going forward. “

However, the plight of UK small businesses and current default levels caused by the ongoing impact of the pandemic could be of real concern.

“We must acknowledge that the UK’s business debt burden has ballooned to unprecedented levels”, said Grant “and “unfortunately this has already created a relentless flow of weak zombie-like companies falling off a loan default cliff.”

Danni Hewson, AJ Bell financial analyst, says that consumers have played their part in bringing the UK economy back to life: “The fact that pubs and restaurants were able to offer indoor service for the full month of June helped to drive GDP up.”

“People have embraced the opportunity to get out and about and consumer facing services returned to just slightly below pre-pandemic levels, with children back in the classroom and patients happy to return for a face-to-face chat with their GPs.”

Chancellor Rishi Sunak said: “Today’s figures show that our economy is on the mend, showing strong signs of recovery.

“I know there are still challenges to overcome, but I feel confident in the strength of the UK economy and the resilience of the British people.”

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