HSBC profit plunge weighs on stock markets
PARIS: A massive drop in profits at banking giant HSBC helped push London and Hong Kong stocks into negative territory yesterday, while eurozone markets bounced off Asian gains to edge higher.
Protectionist fears under Donald Trump and uncertainties caused by Brexit sparked a huge plunge in 2016 profits, HSBC said, sparking a fall in its share price of over six percent in London and dragging the rest of the financial sector lower. Shares in Barclays, Standard Chartered and Lloyds joined the downward trend. Sterling weakness against the dollar, which has helped lift the FTSE index since last year’s Brexit vote, failed to turn the market around this time.
‘Millstone’ HSBC
“Having helped lead the way yesterday, banks are today’s index millstone,” said Michael van Dulken, head of research at Accendo Markets in London. Asian markets mostly extended their rally earlier, with Tokyo boosted by a jump in the dollar against the yen amid intensifying talk that the Federal Reserve could lift interest rates as soon as next month. But Hong Kong, where HSBC shares are also listed, suffered from what Van Dulken called a “whopping” profit drop at the bank as HSBC stock dropped five percent.
The reason HSBC gave for its earnings decline sent new shivers through markets already spooked by uncertainty over political stability in Europe, Brexit and US trade policies.
‘Threat of populism’
“We highlight the threat of populism impacting policy choices in upcoming European elections, possible protectionist measures from the new US administration impacting global trade, uncertainties facing the UK and the EU as they enter Brexit negotiations,” group chairman Douglas Flint said in a statement filed to the Hong Kong stock exchange. On the bright side, mining giant BHP Billiton gained nearly one percent in Sydney as it reported a dramatic rebound in half-yearly profits on the back of surging coal and iron ore prices and improved productivity.
The results lifted miners in London, with BHP, Rio Tinto and Anglo American all posting gains.
Eurozone stock markets meanwhile were underpinned by a key survey saying the eurozone economy grew at its fastest pace in six years in February, as all signs pointed to the recovery maintaining “strong momentum”. Data monitoring company IHS Markit also said job creation in the 19-country eurozone recorded its best level for nearly a decade.
But investors, who took a day off from Trump-watching Monday when US markets were closed for a holiday, were awaiting Wall Street’s opening trend for further guidance. The New York stock market has set records in six of its last seven sessions, but some analysts say a correction is due.
Greenback strong
The dollar climbed against its peers following comments from the head of the Fed’s Philadelphia branch, Patrick Harker, that a March rate rise was not “off the table at this point”. Expectations of a hike have increased since Donald Trump was elected president in November as dealers bet his big-spending, tax-cutting plans will fan inflation. The latest reading on prices increases, as well as healthy jobs growth and factory activity, have reinforced that view. Investors are keeping an eye on the release this week of Fed minutes from its most recent policy meeting hoping for fresh clues about its plans for rates. — AFP