EU indices post more gains on positive company earnings; BP leads
City Index October 25, 2011 8:45 PM
<p>The FTSE 100 and DAX both gained between 0.25% and 0.9% on Tuesday, whilst the French CAC Index fell marginally, as positive company earnings helped […]</p>
The FTSE 100 and DAX both gained between 0.25% and 0.9% on Tuesday, whilst the French CAC Index fell marginally, as positive company earnings helped to encourage more share buying from investors who by and large remain somewhat quiet today ahead of a potential crucial few days in the European debt crisis.
Make no mistake that many in the market are focusing purely on what could come from Wednesday’s EU Summit in Brussels and the vote in the German Parliament on Angela Merkel’s plans to leverage the EFSF, though the vote is expected to pass.
Whilst certainly it seems we are moving in the right direction with regards to implementing widescale plans to recapitalise Europe’s banks and prevent debt contagion within the eurozone, the truth of the matter is that we are still nowhere near where we need to be in identifying what the fine print of those plans will be, and whether there is a consensus agreement for them within the eurozone. The worry is that there is a weight of expectation towards tomorrow’s EU Summit, and if there is a disappointment, investors may question how much further European officials can kick the debt can down the road and this could threaten the recent gains.
Stellar earnings from oil firms BP and BG Group have been the key lift to the FTSE 100 today after both firms’ results beat market expectations and this is where we can locate much of the UK Index’s gains thus far.
Has BP turned a corner?
BP told the markets today that it had ‘turned a corner’ after reporting a profit, excluding one off items, of $5.14 billion, which beat market expectations of a little over $5 billion, and announced that cash flow would increase by 50% over the next three years. Bob Dudley, BP’s Chief, used these results to highlight to the firms shareholders that the oil giant, which had been under huge pressure following the Gulf of Mexico oil leak last year, had turned a corner, and would now look to return to output and cash flow growth with investments in higher margin yielding operations.
Make no mistake that today’s earnings are solid and clearly an important step in the right direction. Shareholders will no doubt take confidence from the report and whilst to some to say that the firm had turned the corner might seem premature, the share price reaction today tells a tale that shareholders are enthused nonetheless. BP shares rose 4% on the day as a result but remain 30% off pre-oil leak levels.
BG Group earnings helped by LNG operations
BG Group shares also rose strongly, topping the FTSE 100 gainers list after the oil firm beat forecasts to report underlying earnings of $1.02 billion for the third quarter against market consensus of $971 million, with net profit rising 21%. Much of the gains were dictated by a strong performance in the firm’s liquefied natural gas operations (LNG), which helped to offset weaker output in the group’s North Sea rigs. BG shares rose over 4% on the day.
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.