UK economy grows | Aviva unveils shares buyback
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5pm: Report knocks index
The FTSE 100 was down 26.91 points (0.4%) at 7,193.23, well below the day’s peak of 7,220.70 after a report on the potential slowing of the economy after the reopening boost.
There was weakness in basic resources with Rio Tinto down 1.05%, Evraz off by 7.14%, and Royal Dutch Shell by 1.8%, as they traded without entitlement to the dividend.
McColl’s Retail Group announced plans to raise £35 million as it looks to invest in its store estate and boost its Wm Morrison supermarkets partnership.
In addition, the convenience retailer posted a widened first half loss, as revenue slipped. McColl’s shares tumbled 26% to 21.50p.
Heading up was Aviva, which closed 14.1p or 3.5% higher at 422.1p as investors bought into its return of capital (see below).
However, AJ Bell financial analyst Danni Hewson said the hard work starts here for CEO Amanda Blanc.
“She has impressed so far by very rapidly jettisoning Aviva’s non-core operations,” says Ms Hewson. “However, this was low hanging fruit and now this process is pretty much complete – and the cash returns to shareholders have been more or less confirmed – attention is likely to switch to the performance of the remaining core business.
“This makes worse than expected first-half profits a bit of a problem. For now investors seem relatively forgiving of the misstep, but if Aviva were to start making a habit of it, they might not be quite so forgiving.”
9am: Aviva tops early risers
Traders defied expectations that they would push up shares in leading companies, instead selling stock to push the FTSE 100 into negative territory, down 17.8 points at 7,202.34.
Aviva topped the index’s leader board in the first hour of trading, up 2.3% on a share buyback announcement and a hike in the dividend (see below).
The fallers were led by Rio Tinto, down 6.6%, after it began trading without entitlement to a chunky dividend payment.
Among the mid-caps, Cineworld was higher following a better-than-expected performance and expectations of a solid end to the year.
7.05am: Economy expands
The UK economy grew 4.8% in the second quarter which means the economy is now 4.4% smaller than it was in the last quarter of 2019, before Covid-19 struck.
The Office for National Statistics said the rise was a result of a widespread leap in consumer spending as physical shops and pubs reopened their doors to customers outdoors.
The Bank of England had predicted that GDP would expand by more than 5% for the second period, which saw the UK’s economy reopened.
However, the ONS said that the UK’s GDP growth for the quarter was faster than those recorded by the US, France, Germany, and Spain.
The ONS revised back its previous estimates for May’s growth from 0.8% to 0.6%.
7am: Aviva returns £4bn
Aviva hiked its dividend and announced a £750 million shares buyback after falling to an IFRS loss of £198 million for the half-year and an 8% fall in adjusted operating profit to £1.13bn.
The intended capital return of at least £4bn starts immediately and follows the best half year sales in general Insurance in a decade and record flows into its savings & retirement products.
The board has declared an interim dividend of 7.35p per share, an increase of 5%.
Chief executive Amanda Blanc said: “Alongside delivering growth, we continue to focus on reducing controllable costs which are down 2%. We are on track to deliver our £300 million savings target in 2022 and are focused on achieving top quartile efficiency in all our businesses.
“While we’ve got more to do, our half year results show we have what it takes to drive growth in our businesses.”
7am: New auditor for Parsley Box
Azets Audit Services has resigned as auditor of newly-quoted food delivery firm Parsley Box, based in Glasgow, and has been replaced by RSM UK Audit following a competitive process.
7am: Cineworld ready for strong Q4
Cinema operator Cineworld said it anticipates strong trading in Q4 supported by a strong film slate and pent-up demand for affordable out-of-home entertainment, subject to the COVID-19 situation.
Group revenue plunged to $292.8m for the half year to the end of June against $712.4m in 2020. It posted a group adjusted EBITDA loss of $21.1m against a profit of $53m last time.
7am: Cairn acquires North Sea licences
Cairn Energy will acquire a majority interest in each of five licences located between the Breagh and Tolmount Gas Fields in the North Sea in a farm-out agreement with Deltic Energy.
Graham Swindells, chief executive of Deltic Energy, said: “This agreement represents the commencement of a wide-ranging partnership with Cairn, whose successful history of opening up new basins is aligned with our exploration-focused strategy.
“The partnership will result in a significant investment across multiple licences within Deltic’s strategic Southern North Sea gas exploration portfolio.”
Traders in Asia showed no willingness to follow a strong close on Wall Street, even as subdued US inflation figures reduced the likelihood of the Federal Reserve reducing its stimulus measures.
The Dow Jones Industrial Average (up 0.6%) and S&P 500 (up 0.25%) closed at record levels after the largest drop in month-to-month inflation in 15 months.
However, Japan’s Nikkei 225 edged lower while Hong Kong’s Hang Seng dropped 0.53% and China’s Shanghai Composite dipped 0.2% as Covid variant fears weighed on sentiment.
Oil prices held on to gains made this week. Brent crude edged slightly higher to $71.43 per barrel, while US crude dipped 0.03% to $69.23 following a call from the US for major producers to boost output.
OPEC agreed in July to boost output each month by 400,000 bpd over the previous month, starting in August.
In London, CFD firm IG Markets was expecting the FTSE 100 to open around 9 points higher at 7,193.