RBS shares up as investors cheer earnings
U.K. stocks pulled higher Friday, as the pound continued its march lower, with investors watching fresh financial reports from major companies. For the week, British blue chips are eyeing a small loss.
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What stocks are doing: The FTSE 100 index picked up 0.4% at 7,516.79, led by gains for the utility and consumer goods sectors. But the basic materials and consumer services groups fell. On Thursday, the index rose 0.5% (http://www.marketwatch.com/story/barclays-shares-shoved-lower-as-ftse-100-steadies-ahead-of-ecb-2017-10-26).
After a week marked by a flood of earnings reports, the London benchmark was on course for a 0.1% decline. That would be a second straight weekly fall.
Earnings in focus: On Friday, Royal Bank of Scotland Group PLC said third-quarter profit jumped to GBP871 million ($1.15 billion) from GBP255 million a year ago. It also said it expects to be profitable in 2018 (http://www.marketwatch.com/story/rbs-profit-up-expects-to-be-profitable-in-2018-2017-10-27). Shares of RBS (RBS.LN) (RBS.LN) climbed 3.1% after the report.
Other bank stocks rose alongside RBS. Barclays PLC (BCS) (BCS) moved 1.2% higher, and HSBC Holdings PLC (HSBA.LN) (HSBA.LN) gained 0.9%. Lloyds Banking Group (LLOY.LN) (LLOY.LN) added 0.7%, while Standard Chartered PLC (STAN.LN) tacked on 0.3%.
Meanwhile, British Airways parent company International Consolidated Airlines Group SA (IAG.LN) posted third-quarter net profit of EUR1 billion ($1.17 billion), which it said was a record (http://www.marketwatch.com/story/british-airways-parent-iag-posts-record-profit-2017-10-27), and a 2.1% rise in operating profit. But its shares flopped down 3.9%.
"There may be short-term concerns about unit revenue trends, with the [third-quarter] improvement (+2.2% constant currency) slower than Q2 and Lufthansa's Q3 outturn," said Liberum analyst Gerald Khoo in a research note Friday.
Pound slide: A drop in the pound's value accelerated Friday, as sterling fell to $1.3092, down from $1.3160 late Thursday in New York.
Pound weakness can bolster multinational companies listed on the FTSE 100, as it boosts the value of sales overseas. Shares of liquor maker Diageo PLC (DEO) rose 1.5%, and luxury-goods maker Burberry Group PLC (BRBY.LN) gained 1.4%.
"The greenback is benefiting from the (gradual) progress of U.S. President Donald Trump's tax plans, alongside the relative certainty of a December rate hike from the Federal Reserve," said Connor Campbell, financial analyst at Spreadex, in a note.
See: The new Trump tax calculator: What do you owe? (http://www.marketwatch.com/story/the-new-trump-tax-calculator-what-do-you-owe-2017-10-26)
"Sterling's problems can arguably be traced back to yesterday's retail sales survey from the CBI, which showed that, in October, high street sales plunged at their fastest rate since 2009 (i.e. the peak of the recession)," he added.
The Bank of England is expected to raise its key interest rate next week.
On Thursday, the European Central Bank said it would cut its monthly asset purchases to EUR30 billion from currently EUR60 billion, but extend the program until at least September 2018. The bank also hinted more easing could be in the cards if required.
Read:Why Italy faces worst shock in Europe as ECB prepares to taper bond buys (http://www.marketwatch.com/story/why-italy-faces-worst-shock-in-europe-as-ecb-prepares-to-taper-bond-buys-2017-10-24)
(END) Dow Jones Newswires
October 27, 2017 04:19 ET (08:19 GMT)