FTSE 100 back below 6,000 on struggling banks and US economic woes
Financial firms led the FTSE 100 2.3% lower on Thursday amid profit warnings from Lloyds Bank, the UK’s largest retail bank, and jitters caused by dire GDP data from Germany and the US. The FTSE 250 meanwhile was down a more modest 1.3%. Lloyds Bank delivered dire results, its profits wiped out by the need to set aside an extra £2.4 billion to prepare for loan defaults caused by the crisis. Figures from the Office for National Statistics in the UK also didn’t help matters, showing England to have the worst coronavirus death rate in Europe.
Lloyds led the losses, down 7.6% on the day, followed by Standard Chartered, down 6.2%, and Legal & General, down 6.1%. Defying the trend on the day, however, was BAE Systems, up 5.9% on the news that coronavirus had only made a small dent in its profits. Rentokil Initial, up 1.7%, and AstraZeneca, up 1.6%, were also modest gainers.
- FTSE 100: -2.3% Thursday, -20.6% YTD
- FTSE 250: -1.3% Thursday, -22.2% YTD
What to watch
Oil giants: Both ExxonMobil and Chevron Corporation report their latest results on Friday. While the oil price measure of West Texas Intermediate has recovered somewhat since April’s staggering lows, analysts expect exploration and production activities of oil firms to be down massively thanks to the coronavirus crisis. However, investors will be on the lookout in the results for signs of an uptick in activity as a hint that some form of ‘normality’ is being restored. ExxonMobil just days ago announced the discovery of fresh oil reservoirs off the coast of Guyana, which could help to reassure investors. Analysts are still ambivalent though, with just three suggesting a buy rating, while 19 recommending hold and four rate the stock a sell.
HSBC: One of the UK’s big four banks, HSBC, reports its interim results on Monday 3 August. The bank is perhaps less exposed to troubles in the UK as much of its activities occur in Asia rather than Europe. However, the bank has been caught in the middle of the battle for rights for Hong Kong citizens. As the Chinese government imposed a new national security law, HSBC drew widespread criticism for its backing of the law. Analysts expect HSBC, like Lloyds Bank, to announce significant loan loss provisions for the second quarter to cover debt defaults caused by coronavirus, which is likely to dampen investor sentiment.
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