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FTSE shares fall led by HSBC earnings disappointment

Last updated: 12:20 21 Feb 2017 EST, First published: 00:57 21 Feb 2017 EST

Share traders
  • FTSE dragged lower by banks

  • HSBC profit sinks 62%

  • Pound down 0.5% against the US dollar to $1.2404

  • Sterling gains 0.3% against the euro to 1.1777 euros

 

FTSE 100 shares were dragged lower by banks such as HSBC and RBS on Tuesday.

The blue-chip ticker closed down 0.3% at 7274. It was led south by HSBC (LON:HSBA) whose shares closed down a whopping 6.5% at 665.7p after reporting a big fall in profits and a smaller-than-expected share buyback programme.

Profits fell 62% to $7.1bn (£5.7bn) and its planned share buyback of $1bn fell well short of hopes of $2.5bn-$3bn. RBS (LON:RBS) fell in sympathy, down 2.7% to 251.8p.

On the flipside, one of the top risers was Rolls-Royce (LON:RR.) up 3.5% to 732.5p as investors continued to react to Goldman Sachs upgrading its rating on the shares to "buy".

Capita (LON:CPI) was the top riser, up 3.9% to 534p after the company said it had undertaken a comprehensive review across its major contracts, and as a result had taken the decision to impair, at year end 2016, a number of historic assets relating to a few specific contracts, which were being amortised over their contract life.

The mid-cap FTSE 250 index closed up 0.1% at 18,772 and led by Essentra Plc (LON:ESNT) up 4% at 504p after broker Numis Securities Ltd reiterated on Monday its Add rating on Essentra, with a price target of 480p.

Among small-caps the FTSE AIM 100 Index ended up 0.2% at 4357 and the FTSE AIM All-Share Index up 0.2% at 909.

London gainers were 34% and losers 30%.


1500 GMT - FTSE 100 listless despite bright start in the US; Mediclinic the forgotten casualty  

  • FTSE 100 little changed 

  • Mediclinic issues second profit warning in five months 

  • Bank of England forecasts are crap - says official 

3pm ... Trading sideways ...

A positive start on Wall Street did little to bolster sentiment this side of the Atlantic as FTSE 100 continued in listless fashion.

At 3pm, the index of blue-chip shares was off 6 points at 7,294.23, dragged lower by HSBC Holdings (LON:HSBA), whose earnings undershot City forecasts.

The other big casualty on the Footsie was Mediclinic International (LON:MDC), which sounded the profit alarm, precipitating a 5.5% reverse in the share price. It’s the second time in just five months the owner of private hospitals has issued a warning.

Dropping down to the small-caps, shares in Bacanora Minerals Ltd (LON:BCN, CVE:BCN) surged 8% after it positioned itself for the expected surge in demand in lithium with assets in two of the current hot spots.

The Dow Jones returned from its President’s Day break refreshed and up 0.4% in early trade in New York. The broader based S&P 500 mirrored the Dow’s movement, as did the tech-heavy NASDAQ.

Finally, the pound reversed back towards US$1.24 after members of the Bank of England Monetary Policy Committee provided a less than convincing defence of economic forecasts post-Brexit.

“I am never confident of any forecast,” said MPC member Gertjan Vlieghe.

"We are probably not going to forecast the next financial crisis, nor are we going to forecast the next recession. Models are just not that good."

Reassuring!

12.25pm … Weak but off lows …

The Footsie remained weaker in lunchtime trade, weighed by big falls from banking stocks after results from HSBC Holdings (LON:HSBA) disappointed, but it was off lows on hopes for a rally across the pond today.

Around 12.15pm, the FTSE 100 index was down about 6 points at 7,293, above the session low of 7,267, but well below the opening peak of 7,318

After being closed yesterday for the President’s Day holiday, US markets are expected to open a tad higher today, pushing back up towards record territory ahead of US manufacturing and service surveys due later, and appearances from several Federal Reserve officials.

Chris Beauchamp, chief market analyst at IG, said: “While European markets have managed to keep the risk bandwagon rolling forward, it is the attitude of the American markets that will really matter.

“Goldman Sachs’ warning last night about ‘cognitive dissonance’ as earnings revisions fall even as the S&P 500 rallies is perhaps the canary in the coal-mine moment. The only question now is whether investors will take notice.”

In London, banks were the main drag on sentiment as HSBC shed over 6% at 665.2p after its 2016 profits – the first from the UK sector, which are all due this week - missed City expectations.

Barclays PLC (LON:RBS) and Royal Bank of Scotland PLC (LON:RBS) – which report Thursday and Friday respectively – both lost around 1.5%.

But Lloyds Banking Group (LON:LLOY) which delivers its numbers tomorrow, edged up 0.02p to 67.37p.

Gains by oil majors provided the main underlying support for the Footsie as crude prices rose by around 1.5% to above US$57 a barrel, with BP PLC (LON:BP.) and Royal Dutch Shell PLC (LON:RDSA) ahead 2.2% at 455.25p and 1.3% at 2,106.5p respectively.

On the second line, explorer Tullow Oil  PLC (LON:TLW) jumped 3% higher to 277.3p as broker Canaccord Genuity upped its stance on the stock to ‘hold’ from ‘sell.’

Among the small caps, wealth manager Lighthouse Group PLC (LON:LGT) gained 7% at 13.5p as its 2016 pretax profit  soared 119% higher to £1.9mln.

But shares in Grafenia Plc (LON:GRA) tanked after another profit warning, plunging 18% to 6.25p after the web and print supplies group indicated full year earnings will be “significantly behind” market expectations.

10.30am ... Dull progress ...

The FTSE 100 drifted in early trade as it fell 20 points to 7,279.61.

HSBC Holdings PLC (LON:HSBA), which is 7% of the index, led the blue-chips lower, dropping 6% after its profits undershot City expectations. The fall wiped almost £800mln off the value of the business.

HSBC’s share price has travelled a long way in the last year, while the earnings of the company have actually taken a step back,” said Laith Khalaf, senior analyst at investment firm Hargreaves Lansdown.

“The bank is a shining example of how the decline in sterling has bumped up the price of some of the UK’s largest companies, without much progress in underlying profits.

Down in sympathy were Barclays (LON:BARC) and Royal Bank of Scotland (LON:RBS).

Mining shares were also on the back foot as a stronger dollar sent gold prices lower.

Anglo American (LON:AAL) reversed earlier gains as it announced that dividend payments would resume this year after posting a 25% hike to annual profits.

BHP Billiton (LON:BLT) shares dropped even as it more than doubled its interim dividend and reported a 65% jump in underlying earnings (EBITDA) to US$D9.90bn for the six months to December 31 2016.

Standard Chartered PLC (LON:STAN) slumped a day after JP Morgan cut its rating on the stock to 'neutral' from 'overweight' ahead of its full year results on Friday. 

More postively, final results from Intercontinental Hotels Group (LON:IHG) pleased the City as it raised its dividend 11% and reported a 23.1% increase in underlying earnings, sending the shares higher. 

Vodafone Group plc (LON:VOD) advanced following reports it plans to sell its pager unit to Capita plc (LON:CPI).

Among the smaller companies, FairFX PLC (LON:FFX), the currency specialist, said customers can now make same-day payments directly into mainland China.

The latest development now makes FairFX one of the few providers capable of facilitating multi-currency transactions, including Renminbi, into China for personal as well as business payments.

Shares eased 0.7p to 42p.

Proactive news headlines

Ortac Resources PLC's (LON:OTC) stake in Eritrean exploration partner Andiamo has been reduced by a funding backed by a venture capital group. Sahrs were falt at 0.025p

Anglo Pacific Group PLC (LON:APF TSX:APY) has appointed investment bank veteran Patrick Meier as its new chairman. Shares rose 2% to 123p.

Abzena plc (LON:ABZA) revenues were in line with expectations, buoyed by the UK (shares off 3% to 38.3p).

mporium Group PLC (LON:MPM) to showcase its IMPACT product to City audience. Shares eased to 13.4p.

Eland Oil & Gas PLC (LON:ELA) was up 7% to 49.3p as production in Nigeria hit 150,000 barrels of oil since operations started in late January.

Copper junior Asiamet Resources Ltd’s (LON:ARS) chief executive Tony Manini is to become executive chairman with Peter Bird joining the board as chief executive. Shares were unchanged at 5.01p.

Miner Vast Resources PLC (LON:VAST) revealed significant operational improvements in the quarter to December. In spite of severe weather in Romania, the company’s Manaila mine increased production of copper concentrate by 44% to 889 tonnes at an average grade of 19.5%.

Zinc concentrate production increased by 371% to 165 tonnes and the shares rose by 10% to 0.645p.

Bacanora Minerals Ltd (LON:BCN) rose 5% to 81.2p as it acquired a 50% stake in the Zinnwald lithium deposit n Germany. Company has option to acquire all of the licence in two years for €30mln on top of €10mln including a contribution to a feasibility study.

6.45am ... FTSE 100 set for a flat open ...

Yesterday was a flat day for the Footsie and this morning it looks like much the same.

US markets were closed yesterday, leaving UK investors without a sign-post to follow, and spread betting quotes indicate the drift will continue this morning.

The top-share index is tipped to open three or four points lower at around 7,296.

Heading into the last 20 minutes of trading, the Nikkei 225 in Tokyo was enjoying a strong session, up 128 points at 19,380.

In Hong Kong, the Hang Seng was going the other way, shedding 104 points at 24,034.

Back in London, the start of the results season for the lenders might inject a bit of zip into lethargic trading.

HSBC Holdings PLC (LON:HSBC) gets us under-way today, with the bank expected to enjoy some handsome currency windfalls.

“Large international operations combined with improved prospects for the Chinese economy have proven powerful tailwinds in the second half of 2016, and both could continue to drive performance going forwards,” suggested Laith Khalaf, at broker Hargreaves Lansdown.

“2016 full year results should hopefully mark the end of the group’s protracted restructuring programme, and with litigation largely in the past hopefully provide a platform from which the bank can grow;.however, the bank’s turnaround has been a long one. Not so long ago it was targeting a Return on Equity of 10% in 2017, it was just 4.4% in Q3 2016, so HSBC still has a long way to go.” 

On the mining front, we have updates from Anglo American PLC (LON:AAL) and BHP Billiton plc (LON:BLT).

The former is expected to post full year revenues of US$22.5bn, up from US$20.5bn the year before.

Underlying earnings (EBITDA) are expected to rise to US$5.9mln from US$4.8mln.

Around the markets

  • Sterling: US$1.2445, down 0.18 cents
  • 10 year gilt: Yielding 1.32%
  • Gold: US$1,234.60 an ounce, down US$4.50
  • Brent crude: US$56.16 a barrel, down two cents

City Headlines

  • Oil price recovery vulnerable as US shale confounds OPEC – Daily Telegraph
  • Political pressure over LSE merger mounts – Daily Telegraph
  • Demonetization in India hits the gemstone market – Daily Telegraph
  • High earners cash in on self-employment – The Times
  • New dispute forces copper price up again – The Times
  • Strike threat looming at BMW over plans to change pensions – The Times
  • Government is failing to tackle massive gender pay gap – The Independent
  • Bovis to pay £7 million to compensate customers for poorly built homes – The Guardian
  • Russia overtakes Saudi Arabia as world’s largest crude oil producer - The Independent
  • HSBC tightens standards on lending to palm oil industry – Financial Times
  • Uber breaks silence on female engineers after harassment claim – Financial Times
  • Japan scraps 24-hour culture to keep down wages – Financial Times
  •  Last call for pagers as Vodafone hangs up more than 20 years after the heyday of the beeper devices – Daily Mail
  • Volkswagen has fixed 470,000 of the U.K. cars hit by the emissions scandal – City AM

 

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