STOCKS SEEN HIGHER; BP REPORTS DROP IN PROFIT

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LONDON (Alliance News) – UK stocks are called for a positive open Tuesday, recovering some of the ground lost Monday after a slide in commodities prices amid US dollar strength, ahead of the Federal Reserve monetary policy decision on Wednesday.

In early UK company news, BP said its underlying profit in the first half of 2016 was down by more than two thirds amid a steep decline in revenue, as the oil and gas major said it should add around 500,000 barrels to daily production by the end of 2017.

The FTSE 100 heavyweight said underlying replacement cost profit, which excludes certain exceptional items, plummeted 68% in the first half of the year to USD1.25 billion from USD3.89 billion a year earlier, as revenue fell 28% to USD84.95 billion from USD117.57 billion.

After exceptional items are taken into account, BP reported a replacement cost loss of USD2.73 billion in the first half compared to the USD4.16 billion loss a year earlier. BP ultimately stayed in the red in the period at the pretax profit line, posting a pretax loss of USD3.34 billion compared to the USD5.61 billion loss a year earlier.

BP kept its second quarter dividend flat at 10.0 cents per share, making a first half interim payment of 20.0 cents per share.

IG says futures indicate the FTSE 100 index to open 17.87 points higher at 6,728.00. The large-cap index closed down 0.3%, or 20.35 points, at 6,710.13 on Monday. Blue-chip commodity stocks ended firmly in the red Monday dragged by a decline in the prices of gold and Brent oil.

CMC Markets chief market Michael Hewson says the decline in commodities prices was due to renewed strength in the dollar. “There seems to be an expectation that perhaps this week’s Federal Reserve rate meeting could well come across as slightly more hawkish than markets were pricing a week ago,” notes Hewson.

“Given recent data this would appear to suggest that the balance of probabilities for a move by the end of the year has shifted somewhat towards the upside, and that markets could be becoming complacent about it,” says Hewson.

Central bank activity will be intense this week, with the Fed’s two-day Federal Open Market Committee meeting starting later Tuesday and the monetary policy decision to be announced on Wednesday at 1900 BST. Meanwhile, the Bank of Japan will release its interest rate decision on Friday.

On Monday, Brent oil stood at USD44.81 a barrel at the London equities close, declining for a third consecutive day. On Tuesday before the stock market open, the North Sea benchmark price hasn’t recovered, quoted at USD44.83 a barrel. Brent touched a low of USD44.73 on Monday, a level it hasn’t seen since early May.

Gold was quoted at USD1,318.62 an ounce at the London close Monday, compared to USD1,323.19 at the same time Friday. Similarly, the precious metal hasn’t regained any ground, standing at USD1,319.10 an ounce early Tuesday.

In Asia on Tuesday, the Japanese Nikkei 225 index fell 1.3%. Producer prices in Japan rose 0.2% on year in June, the Bank of Japan said. That was unchanged from the previous month, and it topped forecasts for an increase of 0.1%. On a monthly basis, producer prices were flat for the second straight month.

In China, the Shanghai Composite is up 0.5%, while the Hang Seng index in Hong Kong is up 1.1%.

Wall Street ended lower Monday, with the Dow 30 down 0.4%, the S&P 500 down 0.3% and the Nasdaq Composite down 0.1%.

Telecommunications giant Verizon will release its second-quarter results before the Wall Street open Tuesday, following its announcement of the acquisition of internet company Yahoo on Monday. Fast-food giant McDonald’s also will report second-quarter figures before the US open. After the US equities close, iPhone-maker Apple releases its third-quarter results, while micro-blogging company Twitter reports its second-quarter figures.

In the economic calendar, UK BBA mortgage approvals are at 0930 BST. In the US, the Redbook index is at 1355 BST. The US Markit services and composite PMI readings are at 1445 BST, while US consumer confidence data are at 1500 BST. Later in the London evening, API crude oil stocks data are at 2130 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

Copyright 2016 Alliance News Limited. All Rights Reserved.

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