LONDON MARKETS: FTSE 100 Drops As Shell, Lloyds Slump After Earnings Reports

By Carla Mozee and Sara Sjolin, MarketWatch

Prospect of U.S. Fed rate hike helps keep benchmark off high

U.K. blue-chip stocks dropped on Thursday as investors absorbed a flood of corporate earnings updates, with shares of Royal Dutch Shell PLC and Lloyds Banking Group PLC falling after their reports.

The FTSE 100 gave up 0.4% to end at 6,721.06, moving back from its best close since last August reached on Wednesday (http://www.marketwatch.com/story/ftse-100-gets-a-boost-as-earnings-reports-roll-in-2016-07-27).

The prospect of a U.S. interest-rate increase was helping draw the London benchmark away from that 2016 high. Late Wednesday, the U.S. Federal Reserve kept the door open for an interest-rate hike in September (http://www.marketwatch.com/story/fed-appears-more-open-to-september-rate-hike-2016-07-27), saying near-term risks to its outlook have diminished.

Read:What investors fleeing U.K. properties are getting wrong (http://www.marketwatch.com/story/what-investors-fleeing-uk-properties-are-getting-wrong-2016-07-28)

Earnings roll in: Shell (RDSB.LN) (RDSB.LN) shares dropped 2.5% after the oil major posted a slide in second-quarter profit (http://www.marketwatch.com/story/shell-profit-falls-93-amid-low-oil-prices-2016-07-28), saying "lower oil prices continue to be a significant challenge across the business, particularly in the upstream." Shell's adjusted earnings of $1.05 billion fell short of a $2.27 billion estimate drawn from a Wall Street Journal poll of analysts.

Lloyds (LLOY.LN) shares fell 5.8% after the retail bank, which is about 9% owned by the U.K. government, warned that Brexit uncertainty could hurt the U.K. economy in the coming months. (http://www.marketwatch.com/story/lloyds-posts-profit-but-warns-brexit-may-hurt-2016-07-28)The bank is ramping up its cost-cutting efforts by axing 3,000 more jobs and closing roughly 200 branches. Lloyds swung to a profit of GBP1.59 billion ($24.19 billion) in the first half of the year.

The lender will also be in the spotlight on Friday evening when the European Banking Authority releases the results of its stress tests (http://www.marketwatch.com/story/europe-stress-test-results-to-put-spotlight-on-italys-troubled-banks-2016-07-28).

Smith & Nephew PLC (SN.LN) slid 5.6% after the medical-equipment maker reported an 18% drop in first-half profit.

On the upside, Rolls-Royce Holdings PLC (RR.LN) shares leapt 14% after the engine maker said it foresees a stronger performance (http://www.marketwatch.com/story/rolls-royce-earnings-hurt-by-weaker-pound-2016-07-28-24854951) in the final six months of the year. It posted a GBP1.8 billion ($2.37 billion) net loss in the first half of the year.

Shares of Anglo American PLC (AAL.LN) pushed up 5.4% after the platinum, copper and diamond miner said it's managed to pare down its hefty debt load (http://www.marketwatch.com/story/anglo-american-posts-loss-pares-debt-load-2016-07-28). The company expects to sell $3 billion to $4 billion in assets this year as it continues to restructure. Anglo's first-half net loss widened to $813 million.

(END) Dow Jones Newswires

July 28, 2016 12:44 ET (16:44 GMT)

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