No dividend, no rally

The FTSE is trading lower even as its European peers start the day on a more optimistic note, with the sharp drop in share prices prompted by the decision of several firms to cut their dividends.

Charts (6)

The FTSE is trading lower even as its European peers start the day on a more optimistic note, with the sharp drop in share prices prompted by the decision of several firms to cut their dividends.

The biggest surprise came from Royal Dutch Shell. Although the company reported underlying results that were actually slightly better than could have been expected, given that oil prices plunged from $70 in January to $25 at present, the firm’s decision to cut dividends by two thirds prompted a heavy selloff and a nearly 8% decline in the share price. The move was doubly unexpected because BP, which alongside Shell is one of the largest dividend payers on the FTSE, kept its dividends intact when it reported earlier this week.

Trading in St. James’s Place saw a similar “dividend revenge” and the wealth management firm lost more than 4% in value.

On the opposite end of the FTSE betting firm Flutter Entertainment rallied as it proceeded with its merger with Stars Group. The firm received the green light to complete the deal, creating a £12 billion business on 5 May.

Oil rallies as US states reopen for business

WTI prices have risen by between 13-14% for three consecutive days as the slow reopening of the US states raised hopes that domestic US demand will start hoovering up some of the excess crude oil available in the market. 

The key numbers later today will be US initial jobless claims which will show if the loosening of the lockdown in the US managed to bring enough people back to work to really create improved demand. 

Brent crude is following in the same footsteps but at a slower pace thanks to the gradual restarting of businesses and trade in Germany, Austria and other European countries.

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