(Alliance News) - Stocks in London ended on a subdued note on Thursday with Royal Dutch Shell hindering the FTSE 100, while investors became more mindful over the outlook for the UK after Amsterdam displaced London as Europe's main financial trading centre.
The FTSE 100 index closed up just 4.36 points, or 0.1%, at 6,528.72. The FTSE 250 ended up 21.41 points, or 0.1%, at 21,017.85 and the AIM All-Share closed up 7.29 points, or 0.6%, at 1,218.80.
The Cboe UK 100 index closed up 0.1% at 648.45. The Cboe 250 closed down 0.1% at 18,497.45 and the Cboe Small Companies closed 0.1% lower at 12,677.16.
In Paris the CAC 40 ended flat, while the DAX 30 in Frankfurt ended down 0.8%.
"Today's FTSE 350 weakness has been dominated by so-called 'reflation trade' stocks, with pubs, domestic travel, and high-street names all feeling the pinch. Unfortunately the post-Brexit outlook appears to be weakening somewhat for the UK, with almost 50% of exporting firms experiencing issues selling to the EU, while Amsterdam has overtaken London as the primary share-trading hub in Europe. Unfortunately, that trend of shifting business away from the UK could be just the beginning if the UK doesn't achieve a deal on equivalence, as governor [Andrew] Bailey points out," said IG Group's Josh Mahony.
Reflation trade where investors put money into assets they believe are positioned to benefit from growth and withstand inflationary pressures in 2021.
On the London Stock Exchange, Coca-Cola HBC ended the best blue-chip performer, up 4.7%. The soft drinks bottler posted a fall in profit for 2020 with volumes hit by the pandemic, though noted improving trends over the second half of the year.
Net sales revenue for 2020 fell 12% to EUR6.13 billion. According to the market consensus cited by Vuma, total reported revenue was expected to fall by 12% in 2020 to EUR6.15 billion. Annual pretax profit was 10% lower at EUR593.9 million from EUR661.2 million. But the bottler edged its payout 3.2% higher to EUR0.64, with consensus forecasts estimating a 16% cut to EUR0.52.
Coca-Cola HBC noted improving volume trends in the second half, with fourth quarter like-for-like volumes down 0.7% and full-year like-for-like volume decline "contained" at 4.6%.
RELX closed up 2.9% after the information and data analytics provider said its three largest business areas performed well and lifted its dividend.
The Anglo-Dutch firm noted that its three largest business areas, STM, Risk and Legal, reported combined revenue of GBP6.75 billion, up 2% from GBP6.61 billion the year prior and representing 95% of the group's total revenue for 2020.
RELX proposed a full-year dividend of 47.0 pence, up 3% on the 45.7p paid out for 2019.
AstraZeneca closed flat after the Anglo-Swedish drugmaker posted a significant jump in profit for 2020 as revenue for the fourth quarter of the year beat consensus estimates.
For 2020, Astra posted pretax profit of USD3.92 billion, more than doubled from USD1.55 billion posted for 2019. This was as revenue climbed 9.2% to USD26.62 billion from USD24.38 billion, surpassing forecasts of USD26.41 billion.
The Cambridge headquartered company declared an annual dividend of USD2.80, unchanged year-on-year.
Looking ahead, Astra said that for 2021, total revenue is "expected to increase by a low-teens percentage", but noted the guidance does not account for any sales of its Covid-19 jab, nor does it include the contribution from soon-to-be acquired Alexion Pharmaceuticals. That USD39 billion deal is expected to close in the third quarter of the year.
At the other end of the large-caps, Royal Dutch Shell ended the worst performer, with its 'A' and 'B' shares down 2.3% and 2.1% respectively. The firm is London's largest company by market capitalisation.
The oil major outlined an ambitious plan to go net zero on carbon emission by 2050, while also aiming to reduce debt and maintain a "progressive dividend policy". Shell said it wants to reduce net debt to USD65 billion.
Shell also aims to "maintain the progressive dividend policy", planning payout growth of around 4% per year. Shell said it thinks carbon emissions for the company peaked in 2018, and oil production peaked in 2019.
"Shell will continue with short-term targets that will drive down carbon emissions as we make progress towards our 2050 target, linked to the remuneration of more than 16,500 staff," the company said.
Shell aims to reduce net carbon emissions by 45% by 2035 and to eliminate net emissions completely by 2050.
"The latest strategy update could lose even more supporters in the investment community as there are so many other companies offering a more ESG-friendly proposition. Green companies are attracting strong interest from investors and Shell may continue to score badly on ESG screens despite its strategy shift," said AJ Bell's Russ Mould.
Sterling was easing from near three-year highs reached on Wednesday, as analysts pointed to the relationship between the UK and the EU remaining strained following the former's departure from the bloc.
The pound was quoted at USD1.3815 at the London equities close, down from USD1.3845 at the close Wednesday.
Britain is prepared to do "whatever is required" to support its fishermen post-Brexit, Michael Gove said amid calls to board EU vessels if export barriers remain.
The Cabinet Office minister acknowledged there are "bureaucratic obstacles" to negotiate and navigate with Brussels, as he was pressed to support "retaliation" against member state vessels given the current difficulties experienced by the British industry.
Analysts at Rabo Bank commented: "This morning's headlines are providing a dose of relativity on the tense relationship between the EU and the UK and also on the speed that the UK economy can re-open this year. While GBP/USD remains elevated, it has pulled away from this week's highs. Similarly EUR/GBP is pushing higher."
Despite the UK securing a sought-after trade deal with the EU, the key issue pertaining to the financial services sector was left relatively unresolved and Rabo Bank thinks this could be a stumbling block for sterling going forward.
Amsterdam overtook London as the largest financial trading centre in Europe last month as Brexit-related changes to finance rules came into force.
An average of EUR9.2 billion worth of shares were traded on Euronext Amsterdam, alongside Dutch divisions of CBOE Europe and the Turquoise exchange in January, according to data from CBOE Europe first reported by the Financial Times.
Following the end of the Brexit transition period, US banks wanting to buy European stocks would no longer be able to trade via London.
The shift is unlikely to see more jobs lost from the City of London, but tensions remain high between London and Brussels as banking regulators continue to thrash out a memorandum of understanding over future rules.
Bank of England Governor Andrew Bailey warned on Wednesday that the UK would not be forced to follow EU rules to the letter and that sensible agreements over what constitutes "equivalence" were needed.
Rabo Bank added: "The testy relationship between the UK and the EU may have implications for other areas. The two sides are currently in talks about a 'memorandum of understanding' for the financial services sector amid reports that the City's hopes for regulatory equivalence are dwindling. There is speculation that the memorandum may only bring an agreement from the two sides to provide notification when regulation changes, which will fall well short of equivalence."
The euro stood at USD1.2130 at the European equities close, flat from USD1.2135 a day before. Against the yen, the dollar was trading at JPY104.75, up from JPY104.66 late Wednesday.
Stocks in New York were higher at the London equities close as investors await developments on US stimulus.
The DJIA was up 0.1%, the S&P 500 index up 0.3% and the Nasdaq Composite up 0.6%.
Lacklustre US unemployment claims data helped keep investors confident that lawmakers would approve a fiscal stimulus package and comments Wednesday by US Federal Reserve Chair Jerome Powell also indicated the monetary policy was likely to remain loose and there is little risk of inflation.
The number of new weekly US unemployment claims came in higher than expected, the latest figures from the Department of Labor showed, but still some way off pre-Covid levels.
The number of Americans filing for unemployment benefits fell to 793,000 in the week ended February 6, from the previous week's revised figure of 812,000, but well above market expectations of 757,000.
On the corporate front, PepsiCo said revenue improved in its third financial quarter, beating expectations, but downgraded its core earnings forecast. The stock was down 0.9% on Wall Street.
The Purchase, New York-based snack food and soft drink maker said revenue in the 12 weeks ended September 5 grew by 5.3% to USD18.09 billion from USD17.19 billion, exceeding expectations of USD17.23 billion.
Looking ahead, PepsiCo said is now expecting full-year organic revenue growth of 4%, in line with its prior outlook, and core earnings per share of USD5.50, down 38 cents from its original forecast, and a slight shortfall from financial 2019's figure of USD5.53.
Meanwhile, Bitcoin struck a fresh high of USD48,364.05 as the world's oldest cryptocurrency gained further mainstream support.
BNY Mellon said it will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients.
"The corporate support just keeps on coming: America's oldest bank - BNY Mellon - will start financing Bitcoin and other cryptos. It's a big deal since BNY is the first big national custodial bank to offer custody services for crypto assets," said analyst Neil Wilson at Markets.com.
Brent oil was quoted at USD61.35 a barrel at the equities close, marginally lower from USD61.40 at the close Wednesday.
Gold was quoted at USD1,836.55, little changed an ounce at the London equities close against USD1,837.45 late Wednesday.
The economic events calendar on Friday has UK GDP figures at 0700 GMT. Financial markets in China are closed for Chinese New Year.
The UK corporate calendar on Friday has a trading update from speciality chemicals firm Victrex.
By Arvind Bhunjun; arvindbhunjun@alliancenews.com
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