Good morning everyone,
Barclays reported a better than expected profit before tax of £6.2bn for 2019, up 9% year on year as its investment bank revealed bumper returns from fixed income trading.
Investors weren’t doing much celebrating though as shares were down this morning on news that the UK regulator was probing the historical links between Chief Executive Jes Staley and disgraced US financier Jeffrey Epstein, who reportedly committed suicide while awaiting trial on sex trafficking charges.
The bank said its board had looked into media reports on Staley’s professional relationship with Epstein, and probed Staley’s characterisation of that relationship.
The Financial Conduct Authority and the Prudential Regulation Authority are investigating. The bank said its board believes Staley has been sufficiently transparent about his ties to Epstein, whom Staley said he had not seen since taking over as Barclays CEO in 2015.
In a busy day for UK companies on the reporting front, Centrica – the owner of British Gas – also revealed operating profits had plunged 35% following the government’s price cap. The UK’s largest energy supplier said profits for 2019 were down to £901m, compared to £1.39bn the previous year. Having seen shares stage an impressive 43% recovery from all-time lows back in August to reach a peak of 93p last month, the stock has capitulated 16% after this morning’s update.
Centrica’s results were in stark contrast to the news coming from energy giant BP which gave the most ambitious promise yet from a major oil company to become carbon neutral. BP’s new CEO Bernard Looney pledged that the firm will have zero net carbon emissions by 2050 or sooner, including both its own operations and upstream production. The sector has found itself under scrutiny as the concept of ESG investing has gained momentum over the past year, with BlackRock – the world’s largest investment firm – recently throwing its weight behind the movement.
BP’s promise outpaces commitments made by Royal Dutch Shell, which include investing billions in green energy projects, while Chevron and Exxon Mobil trail behind, remaining staunchly committed to their core businesses. BP’s share price closed 1.7% higher on the news, and if investors continue to reward the firm it will likely up the pressure on its competitors to rethink the degree to which they embrace the transition to a world fueled by clean energy sources.
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Another day of record highs for US stocks, but reaction to fresh coronavirus numbers to come
US stocks once again closed at record highs yesterday due to hopes that the coronavirus infection rate is slowing but stocks may face a rockier time today after an update from China. Asian stocks opened lower today following a report that in Hubei province – the centre of the outbreak – the death toll doubled on Wednesday and new cases hit almost 15,000. In after-hours trading, MGM Resorts’ stock jumped more than 5% then sagged almost 10%, with the first move a reaction to the announcement of a succession plan for CEO Jim Murren. The stock then fell heavily when the company reported its Q4 results, which included it scrapping earnings guidance for 2020 due to the fallout from coronavirus.
In 2020 it is the Nasdaq Composite that continues to lead the way, and it is now up 8.4% YTD following a 0.9% gain on Wednesday. It was carried higher in part by South American e-commerce firm MercadoLibre, which popped 7.4%. The company had reported a mixed set of quarterly earnings – impressive sales figures marred by a jump in costs – earlier in the week.
S&P 500: +0.7% Wednesday, +4.6% YTD
Dow Jones Industrial Average: +0.9% Wednesday, +3.6% YTD
Nasdaq Composite: +0.9% Wednesday, +8.4% YTD
Miners lead FTSE 100 close to positive territory in 2020
As with their US counterparts, the FTSE 100 and FTSE 250 both closed higher on Wednesday due to an easing of coronavirus fears, taking them to within touching distance of positive territory year-to-date. Miners Anglo American, Antofagasta and Evraz helped lead the FTSE 100 to a 0.5% gain for the day, with share prices rises of 4.9%, 4.1% and 3.3% respectively. Other miners including Glencore and Rio Tinto also finished more than 2% higher. In the FTSE 250, which climbed 0.7% yesterday, fund services business Sanne Group helped lead the way with a double digit share price jump. At the bottom end of the FTSE 250 was defence and engineering firm Babcock International, which fell by 3.9% as its quarterly profits came in at the low end of expectations thanks to an £85m exceptional charge related to its helicopter servicing operation.
FTSE 100: +0.5% Wednesday, -0.1% YTD
FTSE 250: +0.7% Wednesday, -0.4% YTD
Stocks to watch
Alibaba: Chinese tech giant Alibaba reports its latest set of quarterly earnings early New York time today and will be one to watch for signs of how the coronavirus epidemic is hitting spending in China. Alibaba has been cutting some platform fees in response to the virus, but analysts will be probing for details on how the outbreak is affecting the e-commerce firm’s ability to ship goods, as well as asking for insight into consumer spending since the virus saga began. Alibaba’s New York-listed ADR has climbed 23% over the past three months, and 5.8% year-to-date, despite the epidemic.
Pepsico: Pepsico is much more than a drinks company, and also includes snack brands such as Lays, Doritos and Cheetos. The $200bn market cap company reports its Q4 earnings on Thursday, which covers the Christmas holiday period, and investors will be hoping for a repeat of Q3 where increased advertising spending drove higher sales and helped the firm beat earnings expectations. Pepsi stock is up 28% over the past year, and analysts’ average 12-month price target for the stock is marginally below its Wednesday close of $146.08, with a range of $115 to $155.
Nvidia: Graphics giant Nvidia has had a huge year, gaining 78%, including 31% in the past three months. Chipmakers have been riding high in 2020 so far, and both Intel and AMD have beaten earnings expectations in their own quarterly updates recently. Sales in its gaming division will also be watched closely. Wall Street analysts have a huge range of target prices on the stock, ranging from $140 to $315, versus its $272.54 Wednesday close. Overall, 25 rate the stock as a buy, three as an overweight, nine as a hold and two as a sell.
Other US earnings reports to watch today are Kraft Heinz and Roku.
Big names reporting earnings in the UK on Friday include Royal Bank of Scotland and AstraZeneca.
Cryptoassets are slightly off this morning but holding above key levels following the rally over the last couple of days. Bitcoin is still above $10,000, Ethereum hit an 8-month high, and XRP actually bucking the trend is in positive territory for the day. Overnight the price cleared $0.33, a 7-month high. The price has since pulled back and now will look to make a fresh challenge of November’s highs for any bullish momentum to continue.
FC Barcelona kicks off Barca token project
Spanish football giants FC Barcelona have teamed up with fintech platform Chiliz to create their own token – Barca Fans Tokens (BAR). It will launch on the Chiliz’s Ethereum powered blockchain. The tokens will be a reward for participation and can be spent on products and events.
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