April 30, 2020 / 7:18 AM / 25 days ago

Shell's historic dividend cut drags FTSE 100 lower

(Reuters) - An 11% plunge in the shares of oil giant Royal Dutch Shell (RDSa.L) knocked UK’s FTSE 100 lower on Thursday, after the company cut its dividend for the first time since World War Two to cope with the fallout of the coronavirus crisis.

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville

The internationally focused FTSE 100 .FTSE fell 3.5%, with the energy sector proving the biggest drag, taking 65 points off the index.

Shares in rival BP (BP.L), which said it was maintaining its dividend earlier this week, fell 6%. Shell also suspended share buybacks and said it would reduce output by about a quarter, hit by a slump in oil demand due to tight lockdown measures.

“Shell’s decision is devastating to investors across the country as so many people own its shares directly or through their pension,” Russ Mould, investment director at AJ Bell, wrote in a client note. “Shell’s actions could also lead to BP potentially reassessing its position in the near future.”

Markets across the globe took a breather on Thursday after a recent run of gains that helped the FTSE 100 post its biggest monthly gain since April 2018 with a 4% rise.

The FTSE midcap index .FTMC, down 2.3% on the day, still recorded its biggest monthly gain since 2010.

That came on the back of signs that several economies were restarting after coronavirus-induced lockdown and aggressive stimulus actions by central banks and governments globally.

British Prime Minister Boris Johnson said he would set out a comprehensive plan next week on how to start re-opening the economy as Britain had passed through the peak of COVID-19 infections.

However, a batch of weak earnings reports added to the gloom for London stocks.

Lloyds Banking Group (LLOY.L) fell 7.3% as its first quarter pretax profit was wiped out by provisions against expected bad loans due to the pandemic.

Miner and trader Glencore (GLEN.L) dropped 5% after it cut its 2020 capital expenditure and output targets to reflect the impact of the coronavirus on its operations.

Supermarket group Sainsbury’s (SBRY.L) also fell 5% after it warned of a hit from coronavirus-related costs and said it would defer dividend payment decisions until later in the year.

Among the gainers, Reckitt Benckiser (RB.L) rose 3.6% after it forecast performance in 2020 to be better than initially thought and posted a record sales growth in the first quarter due to panic buying ahead of lockdown.

Drugmaker AstraZeneca (AZN.L) gained 1.4% after saying that it would team up with the University of Oxford to help develop, produce and distribute a potential COVID-19 vaccine.

Reporting by Devik Jain, Sagarika Jaisinghani and Sruthi Shankar in Bengaluru; editing by Larry King and Andrew Heavens

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