A grey day for the FTSE

Mixed corporate news and worse than expected UK GDP data is keeping the FTSE in the red this morning, but the decline is softened by the prospect of a large UK infrastructure package

Charts (6)

Mixed corporate news and worse than expected UK GDP data is keeping the FTSE in the red this morning, but the decline is softened by the prospect of a large UK infrastructure package and expectations that when lockdowns fully ease around the globe the recovery will be relatively quick.

InterContinental Hotels said that it expects its revenue per room to fall 7% for the current quarter, but that the improvement towards the end of the April to June period is being driven by the Americas and parts of Asia, including China. The slide in the share price has been relatively modest this morning as most of the negative news has been built into the price for weeks.

Engineering firm Smiths jumped over 7% after it revealed job cutting plans and a major restructuring, and said that it got through the worst of the pandemic with a small increase in underlying revenues.

Oil majors are trading lower after Royal Dutch Shell, like its peer BP a few weeks before, revised down its long term price expectation for Brent crude prices. The Anglo-Dutch oil producer booked impairment charges of between $15 billion and $22 billion in the second quarter to reflect this new reality. The company’s long term expectation for Brent is now at $60/bbl, generously above the current $41 at which oil is trading this morning, indicating that the producer expects a substantial increase in prices at some point this year and in 2021.

For the moment, data coming out of the UK is not quite reflecting this optimism of higher prices. Yes, shops have reopened last week and pubs will start trading from this weekend but UK GDP dropped by 2.2% in the first quarter, the biggest shrinkage since 1979.  Trying to dig the country out of a recession that is likely to be lying ahead, the government is getting ready to pump another £5bn into infrastructure investment, a statement expected by Boris Johnson later Tuesday.

More from FTSE 100

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.