Business Live: Tobacco shares slump

We're coming to the end of trading in London and it will be a dramatic finish for British American Tobacco and Imperial Brands.

BAT is leading the days biggest losers, down 8.1% at £48.91.

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Shares in Imperial Brands, which makes Gauloises, Winston and JPS cigarettes, are off 7% at £32.26.

BBC

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The US Food and Drug Administration says its new plan will "serve as a multi-year roadmap to better protect kids and significantly reduce tobacco-related disease and death".

Its commissioner Scott Gottlieb says: “The overwhelming amount of death and disease attributable to tobacco is caused by addiction to cigarettes – the only legal consumer product that, when used as intended, will kill half of all long-term users.

“Unless we change course, 5.6 million young people alive today will die prematurely later in life from tobacco use.

"Envisioning a world where cigarettes would no longer create or sustain addiction, and where adults who still need or want nicotine could get it from alternative and less harmful sources, needs to be the cornerstone of our efforts – and we believe it’s vital that we pursue this common ground.”

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The US Food and Drug Administration's aim of lowering nicotine levels and exploring ways to shift smokers towards e-cigarettes is "one to light up a sleepy Friday afternoon", says Neil Wilson, senior market analyst at ETX Capital.

He says: "It’s hard to overstate what this could mean for the companies affected: non-addictive levels of nicotine would likely mean a lot fewer smokers and of those people who do still light up, smoking a lot less.

"This will blow a hole in their earnings and forces a fundamental re-evaluation of earnings."

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Oil prices extended gains on Friday.

Brent crude is up 1.5% at $52.25 a barrel and West Texas Intermediate is ahead 1.1% at $49.57.

Prices have been helped by the US moving into what is known as "driving season" when Americans fuel up and speed off on their holidays.

US crude supplies fell by 7.2 million barrels in the week to 21 July, far ahead of expectations.

Ashley Kelty, oil analyst at Cenkos Securities, says:"Positive signs came from the draw in gasoline stocks this week, as the U.S. moves into the peak driving season."

Though analysts at Commerzbank cautioned: "We believe the latest price rise is on a fragile footing."

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Shares in Goodyear have hit the skids.

The tire and rubber maker reported a 2.9% fall in quarterly sales after it shifted 9.2% less product. It has cut its outlook for volume and profit for the full-year.

Chief executive Richard Kramer said: "Our second quarter results reflect the impact of volatile raw material costs and an increasingly challenging competitive environment, particularly in the United States and Europe."

Its shares are down 9.6% at $32.06.

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After a pretty good week for US shares, Friday is turning out to be a downer.

And they haven't been helped by the latest failure by the Republicans to repeal the Affordable Care Act.

Naeem Aslam, chief market analyst at ThinkMarkets, says: "It appears that Obamacare has become a nightmare for Trump and not good news for the markets as well.

"The ability of Trump to deliver on his many promises such as tax and stimulus packages are really shattered. This is going to have a negative impact on the markets as the Trump trade would wind up even further."

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Exxon Mobil shares are 2.41% lower at $78.88 after the oil giant missed second quarter forecasts.

In contrast shares in rival Chevron rose by 1.65% to $106.86 after it said that second quarter profit rose to $1.45bn compared to a $1.47bn loss in the same period last year.

Its chief executive John Watson said: "We're delivering higher production with lower capital and operating expenditures."

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Following its disappointing results on Thursday night, Amazon's shares have opened 4.09% lower at $10.03.21.

It means founder Jeff Bezos' moment in the sun as the world's richest man has well and truly passed.

However, don't feel too sorry for his - he's still a billionaire many times over.

The Dow Jones Industrial Average opened 24.52 points lower at 21,772.03.

The S&P 500 is off 5.26 points at 2,470.16.

The Nasdaq is down 38.26 points at 6,343.93.

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Away from the emissions scandal, Volkswagen is one of a number of German car makers and suppliers who are being investigated over possible collusion.

The EU and national anti-trust authorities are looking into allegations that VW, Porsche, Audi, BMW, Daimler and Bosch operated a cartel by colluding over suppliers, prices and standards.

Germany's Der Spiegel reports that German authorities have received documents from VW citing examples of possible collusion between car makers and supplier Bosch.

Reuters reports the following response from Bosch: "All we know about this matter so far is what we have read or heard in the media. We have had no inquiries relating to it whatsoever from German or European antitrust authorities. As we have no details about the matters under investigation, we cannot comment on them."

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ExxonMobil nearly doubled its profit during the second quarter but the results missed expectations.

The world's largest publically listed oil company said profit rose 97% to $3.4bn on revenues 9% higher at $62.9bn.

We'll see how investors react in just over 20 minutes when the US stock markets open.

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Nancy Curtin, chief investment officer at Close Brothers Asset Management, says that the US economy has managed to grow "in spite of a lack of fiscal stimulus so far from Trump’s presidency".

She says: "A strong performance in export and industrial sectors has been buoyed by weaker dollar, and we’ve seen a steady increase in earnings too.

"We’re still some way from the President’s 3%+ growth target, but the good news is this wasn’t priced in by the market, so any additional tax relief or infrastructure spending could support markets into year end."

The US economy was boosted by consumer spending and higher investment by business in the second quarter of the year.

It showed a vast improvement on the January to March period when growth was revised down to 1.2% from an earlier estimate of 1.4%.

The BBC's Richard Collings gets the first ride on the Post Office's miniature underground letter train, originally built in 1915 and now reopened as part of a museum telling the story of the UK's postal system.

AFP

Philip Hammond's comments on Today about a two stage transition phase for Brexit, have been picked up by Terry Scuoler, Chief Executive of EEF, the manufacturers’ organisation.

“Industry has been getting too many mixed messages from Westminster so many will be relieved to hear the Chancellor giving a clear signal about the government's commitment to transitional arrangements that are realistic, pragmatic and will cause minimal friction," he said.

“Whilst it is a shame a year has been wasted on this and other Brexit related issues, we now need to see this clarified and confirmed as UK government policy. This will enable the UK to move forward in talks with Brussels on other critical issues which affect British business,” he added.

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Let's get a quick update on the FTSE 100 now - and it's still trading lower at 7,395.65, a fall of 47 points or 0.64%.

Of the shares which moved earlier following the publication of their results, BT is still down. It's lost 1.85% making it the second biggest faller on the index.

BA-owner IAG's shares which opened higher are now down by 0.25%, meanwhile Barclays which was also up at the open is now 0.93% lower.

Reuters

Spain's economy grew by 0.9% in the second quarter thanks to improved exports and household spending.

The growth figure, a first estimate from the National Statistics Institute (INE), suggests the country's economy has finally grown back to the size it was before the credit crunch of 2008.

Spain was bailed out in 2012 by the EU at the height of Europe's debt crisis.

Its figures were among the strongest of a batch of European economic data released on Friday. Read more here

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Shares in Adidas have jumped more than 8% after the German sportswear maker raised its forecast for sales and profits.

The move comes after Adidas reported an 18% increase in operating profits for the second quarter of the year.

The company now expects sales - once currency movements are stripped out - to grow by between 17% and 19% this year, against a previous forecast of 12-14%.

Profits from continuing operations should be between 1.360bn euros and 1.390bn euros, Adidas said, compared with earlier guidance of 1.2-1.225bn euros.

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Renault Group profits jumped almost 60% in the first half of this year to 2.4bn euros.

Sales hit a record 1.88 million vehicles.

But that performance was not good enough for investors - shares slumped almost 6%.

There was disappointment that the profit margin in the first-half, rose just 0.1% to 4.8%.

Rival French car maker Peugeot reported a profit margin of 7.3%.

The Renault-Nissan group of companies could overtake Toyota and Volkswagen this year to become the world's biggest car maker by sales, according to chief executive Carlos Ghosn.

Let's get some comment now on those results from airline group IAG which owns BA and Iberia.

The improved performance was driven by a 4% increase in passenger unit revenues and 13.2% fall in fuel costs, partially offset by a 3.5% increase in non-fuel costs, says analyst Laith Khalaf.

At the budget end of the market, capacity is expanding. As more planes take to the sky, short haul airlines are having to cut prices to keep them full. With its long haul focus that’s not a problem for IAG, and the group actually expects second half revenue per passenger to improve. The result is that while rivals are seeing the gains from lower fuel prices frittered away in an aggressive price war, at IAG they’re dropping through to the bottom line and profits are taking off. However, IAG’s own capacity growth looks cautious rather than jubilant, and combined with a rapidly falling debt pile could suggest the group is buckling in for turbulence ahead.”

PA

UK pre-tax profits at high street lender Santander were flat at £1bn in the first six months of the year.

But the firm said that it sees "greater uncertainty" and risks in the outlook for the end of this year and the beginning of 2018.

"The labour market remains strong, but higher inflation, largely from the lower value of sterling, is now reducing households' real earnings.

"This is likely to result in lower consumer spending growth which, when combined with a potentially more challenging macro environment, adds a degree of caution to our outlook," the lender said.

It took a £69m charge to cover claims for payment protection insurance (PPI) compensation in the first six months of the year.

Santander also said net mortgage lending fell by £200m after it withdrew some of its most competitive rates at the end of last year.

The Banco Santander group as a whole saw second quarter net profit jump by 37% to 1.75bn euros (£1.5bn) helped by strong growth in Latin America.

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Apple has announced plans to kill off the iPod nano and shuffle.

They were the company's last two music players without the ability to run streaming service Apple Music and hadn't been upgraded for ages.

The move is part what's been described as a "simplification" of the iPod range to leave just the Touch model.

That product, which is like a slimmed down iPhone but without the ability to be used as a phone, has been updated. Read the full story here

Let's get some comment on those BT results, and the Italian scandal is not the problem the group is facing.

BT’s Italian travails continued with the group forced to set aside a further £225m to avoid legal claims from Deutsche Telekom and Orange relating to the purchase of EE from the firms. That’s on top of a £530m write-off due to the scandal at BT Italia and an expected £300m or so to compensate rivals relating to its Openreach division. The charges are mounting up – pre-tax profit slumped 42% in the first quarter to £418m, while revenues were up a shade. The pension black hole is probably more of a worry. A c£14bn deficit in its c£50bn fund is a gaping wound on its balance sheet. It’s all adding up and investors responded with a 3% selloff in early trading today.

BT's shares have fallen by 2.8% so far this morning, following the release of its results which showed a big fall in profits.

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BT's first quarter profits plummeted by 42% to £418m as a result of a £225m payment to shareholders following its Italian accounting scandal, in which earnings were overstated.

The money will go to Deutsche Telekom and Orange to avert legal action after BT's share price collapsed.

BT bought EE from Deutsche and Orange for £12.5bn, leaving Deutsche Telekom and Orange with stakes in the British firm.

The share price fall following the Italian scandal knocked £8bn off BT's market value and meant it was open to legal action from shareholders.

Meanwhile, BT's quarterly revenue rose 1% to £5.8 billion.

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The FTSE 100 index was down shortly after trading began at 8.00am.

It was at 7,414.59, a fall of 28 points or 0.38%.

Shares in Barclays - which also published its results earlier - are up by just over 1% at the open.

Shares in IAG have opened about 2% higher in London trading, following the release of its results.