London midday: Stocks fall on earnings, BoJ policy decision

London stocks declined on Friday as investors weighed another batch of corporate earnings and the Bank of Japan’s policy decision.

“The FTSE is being dragged down by a leaking oil price weighing on oil major Shell, disappointing results from defensives Reckitt Benckiser and Pearson and continued profit taking in British American Tobacco,” said Mike van Dulken, head of research at Accendo Markets.

“This is offsetting assistance via positive results from Barclays, M&A hopes helping Shire up after yesterday's speculation- infused pop by AstraZeneca and heavyweights HSBC and SABMiller both 1% to the good.”

Royal Dutch Shell shares slumped as oil prices fell to their lowest levels since April on Friday with Brent crude down 1.2% to $42.18 per barrel and West Texas Intermediate down 0.80% to $40.81 per barrel.

Pearson was on the back foot after the education company’s first-half sales and revenue missed consensus estimates.

Consumer goods group Reckitt Benckiser was in the red after it posted a drop in first-half pre-tax profit but a rise in revenue, as it reaffirmed its full-year net revenue target at the lower end of its guidance range.

On the upside, Barclays rallied as it reported first half profits that exceeded analysts’ estimates.

International Consolidated Airlines edged higher as it reported a rise in first half operating profits and revenue despite the impact of terrorist attacks and strikes.

Meanwhile, the BoJ kept interest rates steady on Friday but said it would increase its purchases of exchange-traded funds to an annual pace of Y6trn from Y3.3trn. It also doubled the size of a lending programme for local companies to $24bn.

The Bank said in a statement that the measures were to prevent uncertainties such as the Brexit vote and the slowdown in emerging economies from denting business confidence and consumer sentiment and to “ensure smooth funding in foreign currencies by Japanese firms and financial institutions".

The ETF purchase increase was expected by the market but the inclusion of no other key measures, such as additional Japanese government bond purchases, a rate cut or negative rate loan support programme, was seen as a disappointment by some analysts.

The announcement came as official data showed Japan remained in deflation. The consumer price index fell 0.4% year-on-year in June, flat on the previous month and in line with expectations.

Core CPI, which strips out fresh food, worsened to a 0.5% year-on-year decline from a 0.4% contraction in May. Economists had predicted it would remain unchanged.

“Of course, with Japanese June CPI today coming in at -0.4% y-o-y headline and just 0.4% core, and inflation-adjusted household spending collapsing 2.2% y-o-y vs. an expected -0.4%, it’s abundantly clear the BoJ is failing badly,” said Rabobank.

Elsewhere, inflation in the eurozone came in higher than expected for July, according to a flash estimate by Eurostat. Inflation hit 0.2% in July, marking its highest level since the end of last year and up from 0.1% in June. Economists had pencilled in a 0.1% increase.

Economic growth in the eurozone slowed in the second quarter, as expected. According to a preliminary flash estimate by Eurostat, eurozone gross domestic product grew 0.3% in the second quarter compared to 0.6% growth the previous quarter, in line with consensus estimates.

The eurozone unemployment rate was unchanged in June at 10.1%, Eurostat revealed, in line with economists’ expectations. It remained at the lowest rate recorded in the bloc since July 2011.

Still to come, US economic growth data at 1330 BST, personal consumption figures at 1330 BST and the University of Michigan’s consumer confidence index at 1500 BST.

Market Movers

FTSE 100 (UKX) 6,715.12 -0.09%
FTSE 250 (MCX) 17,218.86 -0.19%
techMARK (TASX) 3,469.82 0.00%

FTSE 100 - Risers

Barclays (BARC) 159.55p 8.91%
Royal Bank of Scotland Group (RBS) 195.10p 3.78%
easyJet (EZJ) 1,051.00p 3.34%
International Consolidated Airlines Group SA (CDI) (IAG) 420.50p 2.74%
Sky (SKY) 926.50p 2.49%
Schroders (SDR) 2,592.00p 2.41%
TUI AG Reg Shs (DI) (TUI) 985.50p 2.39%
Legal & General Group (LGEN) 205.30p 2.34%
Standard Life (SL.) 299.00p 2.33%
Shire Plc (SHP) 4,930.00p 2.32%

FTSE 100 - Fallers

Pearson (PSON) 873.00p -10.00%
Reckitt Benckiser Group (RB.) 7,118.00p -4.30%
Rolls-Royce Holdings (RR.) 806.50p -2.95%
Randgold Resources Ltd. (RRS) 8,670.00p -2.03%
National Grid (NG.) 1,079.50p -1.95%
Relx plc (REL) 1,430.00p -1.79%
Royal Dutch Shell 'A' (RDSA) 1,951.50p -1.66%
SSE (SSE) 1,516.00p -1.62%
Royal Dutch Shell 'B' (RDSB) 2,019.00p -1.58%
Fresnillo (FRES) 1,873.00p -1.52%

FTSE 250 - Risers

Indivior (INDV) 300.40p 10.24%
International Personal Finance (IPF) 268.20p 5.72%
Kaz Minerals (KAZ) 154.60p 4.39%
UBM (UBM) 657.00p 4.04%
Domino's Pizza Group (DOM) 399.40p 3.50%
Restaurant Group (RTN) 346.40p 3.37%
Henderson Group (HGG) 230.10p 3.23%
Wizz Air Holdings (WIZZ) 1,540.00p 3.22%
Virgin Money Holdings (UK) (VM.) 271.00p 3.20%
Just Eat (JE.) 545.00p 3.02%

FTSE 250 - Fallers

Essentra (ESNT) 500.00p -20.19%
Laird (LRD) 291.80p -12.11%
Acacia Mining (ACA) 547.50p -6.81%
Berendsen (BRSN) 1,256.00p -6.06%
Countrywide (CWD) 250.00p -5.02%
CLS Holdings (CLI) 1,349.00p -3.64%
Amec Foster Wheeler (AMFW) 435.80p -3.33%
Hochschild Mining (HOC) 264.80p -3.00%
Debenhams (DEB) 56.90p -2.32%
Marshalls (MSLH) 269.70p -2.07%