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“BP did its best to lift the FTSE 100, but the index struggled with headwinds from Aveva, where CEO Craig Hayman has quit, and various mining stocks,” comments Russ Mould, Investment Director at AJ Bell.
"The UK index was flat at 6,966, albeit still giving investors hope that it will soon break through the 7,000 level again.
“We’re now in a very busy week for companies updating on earnings and trading in the UK and US, which means investors are likely to be rearranging their portfolios in reaction to the news. This could result in heightened trading volumes and mean markets are principally driven this week by company fundamentals rather than politics and macroeconomics.
“Tesla’s shares look like they are in for a bad day when US markets open on Tuesday, with investors flabbergasted that cash generation is coming from the sale of regulatory credits and profit driven by trading bitcoin, rather than its principal activity of making and selling electric vehicles.
“It’s somewhat ironic that these results follow the news that Tesla CEO Elon Musk will host the comedy TV show Saturday Night Live. He likes to be in the spotlight and investors may soon ask if the vehicle interests are simply becoming a sideshow.”
HSBC
“The banking sector has been through the wars over the past decade or so, with the global financial crisis and PPI scandal knocking it for six. The coronavirus pandemic looked set to inflict more damage, prompting banks to put aside large amounts of money to cover any bad debts. So far it looks as if they were over-cautious.
“HSBC is not only releasing some of these provisions, but it is also toasting good trading in various parts of its business. In the UK it is riding the surge in demand for properties, with its mortgage lending doing well in the first quarter.
“These factors will put pressure on the business to be generous with dividends, yet HSBC remains cautious while the pandemic rages on and won’t decide on when next to pay cash to shareholders until August.
“Investors will be pleased that share prices across the banking sector in general have picked up in the past six months following a miserable period, but ultimately dividends are one of the key reasons why people own shares in the likes of HSBC and any reluctance by these banks to dole out the cash will not go down well.”
BP
“Appointed a little over a year ago, chief executive Bernard Looney faces the difficult task of turning BP’s questionable Beyond Petroleum tagline from the early noughties into a reality.
“His tenure is likely to be judged on whether the commitment to the transition away from fossil fuels went much beyond this marketing gimmick.
“There is no question that oil and gas activities still fuel the business with an increase in BP’s first quarter earnings and cash flow almost entirely driven by the big recovery in commodity prices.
“BP faces a difficult challenge of keeping its balance sheet under control, investing for the future, and returning capital to shareholders who have come to expect generous payouts.
“Hitting its net debt target a year earlier is a good start and this is allowing the company to resume share buybacks in the second quarter.
“However, the outlook on cash is less positive for the second quarter and longer term it feels like something has got to give if BP is truly to complete its ambitious transformation into a zero-carbon business.
“Investors may question whether BP is putting off difficult questions now rather than facing them full on and truly ‘transforming while performing’ as the company would have it.”
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