The FTSE 100 dropped sharply this morning as Lloyds and Shell weighed down London’s blue-chip index, which headed for its biggest fall since 2 October.
The index fell roughly one per cent to 7,254 points, with the DAX and the CAC both down 0.7 per cent.
Shell’s share price fell nearly 3.8 per cent to 2240p on the back of a 15 per cent slide in profits led by weak oil prices.
Chief Executive Ben van Beurden warned that the macroeconomic conditions could affect the company’s proposed $25bn a year buyback scheme.
Russ Mould, investment director at AJ Bell, said: “Expectations were not set that high for Royal Dutch Shell’s third quarter results but they still had investors running scared as profit came in well below expectations and fell sharply year-on-year.”
Lloyds Banking Group narrowly avoided tipping into the red this morning after taking a major third-quarter dent from the mis-selling of payment protection insurance (PPI).
The lender’s pre-tax profits fell 97 per cent to £50m. Shares fell 2.5 per cent to 56p.
Mould said: “The banks must be cursing our habit in the UK of leaving things to the last minute as Lloyds becomes the latest name in the sector to be hit by a wave of late payment protection insurance (PPI) claims ahead of an August deadline. The monster provision for PPI spooked investors on Halloween as it virtually wiped out third quarter profit.
Shares in housebuilder Crest Nicholson also tumbled eight per cent this morning as the company warned pre-tax profit for the current year would be down by up to 22 per cent
Analysts were forecasting £153 million pre-tax profit for the current financial year so the new guidance of £120 million to £130 million is a big step back for the business.
However, the confirmation of an election for the 12 December has given the pound a small boost. Fiona Cincotta, senior market analyst at www.cityindex.co.uk, said:
“The pound is up nearly 0.3% against the dollar and 0.10% against the euro partially in relief that the no-deal Brexit is now off the table.”
In the US, the S&P 500, DOW and the NASDAQ were all up between a third and half a percentage point, after a third interest rate cut from the Federal Reserve gave markets a boost.
Mould said the Fed had clearly changed strategy: “A year ago, the Federal Reserve was shrinking its balance sheet to unwind quantitative easing and raising interest rates, with a clear plan to do – keep doing more of the same. Now it is cutting borrowing costs and expanding its balance sheet.”
However Bloomberg reported on Thursday, citing unnamed sources, that Chinese officials are doubtful about whether they can strike a comprehensive long-term trade deal with Washington.
A further blow to their hopes was struck this morning when Chile announced it would not host November’s APEC summit, where the two were due to continue discussions.
The Nikkei 225 and the Hang Seng were also up by 0.4 per cent and 0.9 per cent respectively on the Federal Reserve’s cut.
Mould added: “A third interest rate cut this year from the Federal Reserve served to give the US markets a boost last night but that’s failed to extend to the UK and the rest of Europe. Only Asia shares were in jubilant mood on Thursday.”
Main image credit: Getty