Royal Dutch Shell (RDSb), the FTSE 100's largest stock, has led the way in early trading, jumping 4.4% as the oil giant reported a 33% increase in quarterly earnings as its cost-cutting efforts begin to bear fruit.
Shell's earnings for the quarter hit $6.1 billion (£3.6 billion) ahead of investor expectations of $5.5 billion, and announced a dividend of $0.47 per share, up 4% year-on-year. The news sent shares 105.5p higher at £25.95.
'Results were strong in both upstream and oil products, with upstream production volumes materially higher than consensus expectations,' said analysts at Jefferies.
Shell's performance helped give some support to the FTSE 100, down 16 points, or 0.2% at 6,757 points as Ukraine tensions and worries over an earlier-than-expected interest rate hike in the US weighed on investor sentiment.
Data released yesterday showed that the US economy grew 4% in the second quarter, a sharp rebound from a contraction in the first three months of the year as the cold winter took its toll. Even that drop, however, now appears to have been less severe than thought, revised up from a 2.9% contraction to a 2.1% dip.
That strength of the US economic recovery prompted investors to fret that the US Federal Reserve, which last night tapered its money-printing quantitative easing programme by a further $10 billion, will be forced to act earlier on interest rates.
'Fed chair Janet Yellen has recently warned that rate hikes would be more rapid than market expectations if the labour market continues to outperform Fed expectations,' said Keith Wade, chief economist at Schroders.
'Such a comment supports our baseline forecast that US interest rates will rise ahead of market expectations to 1.5% by the end of next year and move higher in 2016. Indeed, [yesterday's] growth and inflation figures add further evidence that the economy is on a stronger footing than many expect.'
Markets were more sanguine about Argentina's default on its debts for the second time in 12 years. Latin America's third biggest economy failed to meet a deadline for coupon payments on exchange bonds, after a long legal battle with hedge funds.
'Argentina was isolated from international capital markets for years so we don't expect the default to distort any global capital flows,' said Steve Ellis, manager of the Fidelity Emerging Markets Debt fund. 'However, there will be remaining risks around a longer term default which would have negative impacts on the Argentine economy.'
BG Group (BG) was another riser on the FTSE 100, adding 21p, or 1.8%, to £12.02 after the oil and gas group reported a rise in profits driven by stronger gas prices and sales. Second quarter profits hit $2 billion (£1.2 billion), with increased production in Brazil and higher prices in Asia and South America providing a boost. BG Group has been searching for a new chief executive after previous boss Chris Finalyson left in April.
'A decent set of second quarter results from BG which should provide some relief,' said Investec analyst Neill Morton.
Lloyds Banking Group (LLOY) was among the fallers, as investors focused on lower-than-expected statutory profit levels in an otherwise impressive set of results. While underlying profits hit £3.8 billion over the first half of the year, statutory profits were just £863 million, as a larger-than-expected £600 million provision for payment protection insurance and £500 million of other regulatory provisions weighed.
Lloyds also said it would be asking the financial regulator for permission to restart paying 'modest' dividends again in the second half of the year.
'Notwithstanding the disappointment of further below-the-line charges, we believe that Lloyds continues to make good underlying progress as it continues to benefit from a combination of management action and an improving UK economic backdrop,' said Gary Greenwood, analyst at Shore Capital.
Lloyds fell 2p, or 2.6%, to 74.4p.
Financial sales force St James's Place (SJP), which Lloyds sold off last year, continued its slide after reporting results this week, down 4.3% at 723p.
Engineering group Weir (WEIR) fell 3.7% to £25.70 as a strong pound led to it reporting a 7% fall in first-half operating profits. Fund group Schroders (SDR) dropped 3.3% to £24.16 despite assets under management hitting record highs, as investors focused on first-half revenues that lagged expectations.
Outside the FTSE 100, 'mid cap' stock Afren (AFRE) plunged nearly 30% after the oil explorer announced it had temporarily suspended chief executive Osman Shahensah and chief operating officer Shahid Ullah pending an investigation into payments.
The company said in a statement a review for the board had found evidence of 'the receipt of unauthorised payments potentially for the benefit of the chief executive and chief operating officer'.
'Small cap' stock Hyder Consulting (HYC) meanwhile rose 36.8% to 642p after the UK engineering group agreed to be bought by Dutch rival Arcadia for 650p per share.