By This Is Money Reporters
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17.30 (CLOSE): A slide in HSBC shares failed to halt the upward momentum of the London market today as the FTSE 100 Index moved closer to a record high.
The banking giant finished 3 per cent lower after a 9 per cent rise in annual profits to $ 22.6billion (13.6billion) failed to meet the lofty forecasts of the City.
The wider market spent much of the session treading water but the impact of a strong start to trading on Wall Street, where there was another record high for the S&P 500, left the FTSE 100 Index 27.8 points higher at 6865.9.
HSBC harried: The global lender’s shares suffered after its annual results failed to meet the City’s high expectations
The top flight is now within 100 points of its record close of 6930 seen in December 1999, having just risen for three weeks in a row.
In a quiet session on currency markets, the pound was flat against the US dollar and euro at 1.66 and 1.21 respectively.
Vodafone’s long-awaited sale of its stake in US operator Verizon Wireless has been a big factor in the continued strong performance of the FTSE 100.
As well as realising 49billion for investors in the shape of cash and shares, the City has been excited by the mobile giant’s prospects going forward. Shares added another 15.8p to 252.3p today.
In light of its profits miss, HSBC fell 18.5p to 635.7p as it warned that conditions in emerging markets were likely to remain choppy this year.
The other big development of the session came in the FTSE 250 Index after Dixons Retail Group and mobile phone retailer Carphone Warehouse said they were in talks over a potential merger.
Dixons, which trades as PC World and Currys in the UK, surged 7 per cent or 3.1p higher at 50.3p, while Carphone was 27p stronger at 333p.
A tie-up would create a new company worth more than 3.5billion as both Dixons and Carphone have market valuations of around 1.8billion.
For Dixons, it would offer a convenient way to meet its growth ambitions in the mobile phone market, where it currently has a partnership with Phones4U.
Elsewhere, More Than insurer RSA was 3.7p lower at 97.5p after it confirmed it was considering plans for a rights issue in order to shore up its balance sheet.
It has been reported that new chief executive Stephen Hester is planning to tap investors for as much as 800million. RSA is due to provide an update in its annual results on Thursday.
Associated British Foods was 73p lower at 2920p as it said it expects first half profits to be in line with 2013, with an ‘excellent’ performance from its Primark stores offset by a slump in trading in its sugar business.
Outside the top flight, shares in Mothercare were 3p higher at 250.5p after the under-pressure retailer announced the surprise resignation of chief executive Simon Calver.
The biggest FTSE 100 risers were Bunzl up 102p at 1585p, Vodafone ahead 15.8p at 252.3p, William Hill up 14p at 371.4p and Hargreaves Lansdown ahead 43p at 1357p.
The biggest fallers were RSA Insurance down 3.7p at 97.5p, HSBC Holdings off 18.5p at 635.7p, Associated British Foods down 73p at 2920p and Antofagasta off 22p at 933p.
15.40: An opening leap by US stocks thanks to more corporate takeover activity helped the Footsie tick fractionally higher in late afternoon trade, but the UK blue chip index was still weighed down by a big post-results decline from global banking giant HSBC.
With less than an hour of trading to go, the FTSE 100 index was up 0.4 points at 6,838.4, recouping its earlier falls but failing really to build on Friday’s gains.
But on Wall Street, the mood was brighter as deal news provided a boost, with shares in RF Micro Devices leaping 12 per cent higher after it said it will merge with TriQuint Semiconductor in an all-stock deal. TriQuint shares were up 18 per cent.
US boost: Shares in New York jumped higher today helped by another bout of takeover activity
In early deals, the Dow Jones Industrial Average leapt 148.8 points higher to 16,252.1, claiming back some of Friday’s falls.
The UK top flight closed higher for a third week in a row having risen by more than 150 points last week to bring the December 1999 intra-day record high of 6950.6 firmly into view.
The index is up by around 1 per cent since the start of 2014, recovering from a fall in January caused by the downturn in emerging market economies.
But some of those worries returned today as concerns over emerging markets hurt heavyweight mining stocks, led by Chilean copper miner Antofagasta down 22.5p at 932.5p.
The sector suffered after media reports in top metals consumer China stoked fears that local banks had begun tightening loans to property developers and some other sectors such as steel, cement and construction.
But it was a 3.5 per cent fall by HSBC that took the most points off the FTSE 100 index today, after the bank posted lower-than-expected profits and warned about uncertain times for emerging markets, which have been hit by unrest in Ukraine and currency slumps in Argentina and elsewhere.
‘There are concerns about corporate earnings. We’ve had disappointing results from HSBC which is dragging the index down,’ said Mike Franklin, chief investment strategist at Beaufort Securities.
HSBC shares shed 23.1p at 631.1p.
But cushioning the blue chip market’s losses was a 2.5 percent rise by mobile telecoms group Vodafone, which hit a 13-year high on speculation the company might become a bid target after the completion on Friday of its deal to sell its stake in US operator Verizon Wireless to its partner Verizon.
Vodafone’s stake sale is set to prompt the largest capital return in corporate history, which should bring in fresh cash for major pension funds which own Vodafone shares and could use that cash to re-invest in the FTSE, boosting the index back towards record levels.
Vodafone shares, which have been consolidated to balance the massive cash return, were 12.0p higher at 248.5p.
Packaging firm Buzl was the top FTSE100 gainer, up 112.0p at 1,595.0p following solid annual results.
Analysts at Investec Securities said: ‘Another positive set of FY results from Bunzl, which have come in 5 per cent ahead of our expectations.
‘With margin and cashflows remaining robust and further acquisitions likely during the course of FY14, the outlook remains positive,’ the broker’s analysts added in a note placing their target price under review and reiterating an add rating on Bunzl shares.
Among the small caps, oil explorer Gulf Keystone – a retail investors favourite – jumped over 3 per cent higher, up 4.8p to 156.5p after it announced its intentions to step up from the junior AIM market to the official London Stock Exchange list on March 24.
‘Having suffered wild volatility in the past from a mass of speculative investors, often holding the stock on margin, the move will hopefully pave the way for a shift towards institutional ownership and a touch more predictability,’ said Toby Morris, senior sales trader at CMC Markets.
But going in the opposite direction, shares in lighting products firm Dialight shed 14.7p to 750.2p after it reported a drop in full year earnings despite increased revenues as inflated distribution and administrative costs hit home.
13.45: London shares stayed weak at lunchtime, weighed down by a big falls from global banking giant HSBC after its annual results disappointed.
Having notched up its third successive weekly gains last week, the FTSE 100 Index slipped back today, off 12.5 points at 6,825.5.
Market sentiment was also hit by concerns over the health of the Chinese economy after figures showed that growth in average new home prices in 70 major cities slowed for the first time in 14 months.
Electricals jolt: Shares in Currys PC World owner Dixons Retail jumped 10 per cent higher after revealing merger talks with Carphone Warehouse
Fresh worries about the Chinese economy came after a G20 meeting of the world’s most important finance ministers at the weekend in Sydney stressed aiding growth in the global economy was the recurring theme.
While much was disagreed upon, all at the G20 agreed to a proposal that would lift economic activity by 2 per cent over the next five years.
However, worries about deflation in the Eurozone, Britain’s biggest trading partner, could still pose a threat to global growth.
Data released today showed that euro zone consumer prices fell in January at their fastest ever pace on a monthly basis, dragged down by a slump in the cost of non-energy industrial goods, keeping annual inflation well below the European Central Bank’s target.
The inflation rate in the 18 countries sharing the euro dropped by 1.1 per cent in January when compared with December, keeping the annual inflation rate at 0.8 per cent for a second month in a row, the EU’s statistics office Eurostat said.
The annual inflation rate was revised from 0.7 per cent, which Eurostat released in a flash estimate on January 31. Economists had expected consumer price inflation to accelerate slightly to 0.9 per cent in January, a level that is still well below the ECB’s target of close to but below 2 per cent.
In Germany, Europe’s largest economy, consumer prices fell by 0.7 per cent on the month, keeping the annual inflation rate steady at 1.2 per cent, with both figures coming below expectations.
But although there are worries about falling prices, the latest German ‘business climate’ survey for February, also released today increased to a reading of 111.3, beating the consensus forecast in a Reuters poll that it would hold steady at 110.6.
European bourses were mixed on the news, with Germany’s DAX 30 down 0.5 per cent, but France’s CAC 40 up 0.3 per cent.
In London, HSBC was the biggest drag on the FTSE 100 index with the shares tumbling 4 percent or 23.2p to 631p.
HSBC shares dived after its 9 per cent rise in annual profits to 13.6billion failed to meet the lofty expectations of City analysts. The figure was well short of forecasts for 14.8billion, although HSBC said it was ’leaner and simpler’ after a three-year turnaround.
Elsewhere, More Than insurer RSA was 2.7p lower at 98.5p after it confirmed that it was considering plans for a rights issue in order to shore up its balance sheet.
It has been reported that new chief executive Stephen Hester is planning to tap investors for as much as 800million. RSA is due to provide an update in its annual results on Thursday.
And Associated British Foods was 75p lower at 2918p after it said it expects first half profits to be in line with 2013 as an ‘excellent’ performance from its Primark stores offsets a continued slump in trading in its sugar business.
Staying on the high street, the other big development of the session came in the FTSE 250 Index after Dixons Retail Group and mobile phone retailer Carphone Warehouse said they were in talks over a potential merger.
Dixons, which trades as PC World and Currys in the UK, surged 10 per cent or 4.5p higher at 51.6p, while Carphone was 7.75p stronger at 313.75p.
A tie-up would create a new company worth more than 3.5 billion as both Dixons and Carphone have market valuations of around 1.8 billion.
For Dixons, it would offer a convenient way to meet its growth ambitions in the mobile phone market, where it currently has a partnership with Phones4U.
And shares in Mothercare were 4p higher at 251.5p after the under-pressure retailer announced the surprise resignation of its chief executive Simon Calver.
09.45: A big drop by global lender HSBC following a results disappointment helped drag the Footsie lower as the morning session progressed, with heavyweight miners also under pressure amid concerns over the health of the Chinese economy.
By midmorning, the FTSE 100 Index was down 19.1 points to 6,819.1, tracking falls by Asian markets today with a slower increase in Chinese property prices adding to recent jitters about the strength of the world’s second largest economy, with growth in average new home prices in 70 major cities slowing for the first time in 14 months.
The worries about the economic health of China, which is the world’s top consumer of metals, weighed on mining stocks in London, with copper miner Rio Tinto the worst off in the sector, down 54.0p at 3,547.0p.
The biggest blue chip casualty, however, was HSBC shares in which slumped by 4 per cent after its annual profits of 13.6billion failed to meet the lofty expectations of City analysts.
The 9 per cent improvement on a year earlier was well short of forecasts for 14.8billion, although HSBC stressed it was now ‘leaner and simpler’ following a turnaround started in 2011.
Commenting on the HSBC results, Martyn King, analyst at Edison Investment Research said: ‘While profits are up in most regions, the cost programme is ahead of target, impairments are falling and the management tone is relatively positive, we would expect the miss against consensus to see a negative reaction today.’
HSBC shares were 30.5p lower at 623.7p.
Elsewhere, More Than insurer RSA dropped 1.65p to 99.5p after it confirmed weekend press reports that it was considering plans for a rights issue in order to shore up its balance sheet.
RSA reports its annual results later this week.
And conglomerate Associated British Foods was 43p lower at 2,950p after it said it expects first half profits to be in line with 2013 as an ‘excellent’ performance from its Primark stores offsets a continued slump in trading in its sugar business.
However, the FTSE 100’s falls were limited by a gains in index heavyweight Vodafone following the completion on Friday of the long-awaited deal to sell its stake in US operator Verizon Wireless.
As well as realising 49billion for investors in the shape of a distribution of cash and Verizon shares, the City has been excited by the mobile giant’s prospects going forward.
Vodafone added 11.1p to 247.7p today as the stock adjusted for a consolidation to prevent the shares falling after the biggest cash return in corporate history.
Packaging firm Bunzl was also a blue chip gainer, adding 56.0p at 1,539.0p after its annual results pleased investors.
08.50: The Footsie fell back in early deals this morning, tracking declines in New York on Friday and in most Asian markets today where some Chinese house price data weighed on investor sentiment.
HSBC was the biggest casualty after the global bank warned of ‘choppy markets’ as it posted below-forecast annual results.
At open, the FTSE 100 index was down 11.5 points at 6,826.5, retreating after having closed 25.1 points higher on Friday to notch up its third successive weekly gain.
FTSE falls: Weakness in Asian markets and big falls by global lender HSBC after disappointing results weighed on the Footsie early on today
Chinese stocks were under pressure today following a local media report that stated medium-sized banks are tightening its financing to property developers.
The tightening, which is likely to remain until end of March, is viewed as a negative in the short-term as the authorities try increase the quality of credit on offer to help overall growth.
Craig Erlam, market analyst at Alpari (UK) said: ‘There is a very real fear that the People’s Bank of China will be forced to tighten lending related to property in a bid to slow down the rise in property prices. The 9.6 per cent annual rise in January hasn’t helped ease these fears, despite it being slightly lower than the 9.9 per cent figure in December.’
Weekend news out of the G20 finance ministers meeting in Sydney also failed to offer much support. Although they said that they intended to take measures to add $ 2trillion to the global economy over the next five years, the G20 finance ministers didn’t really shed any detail as to how this would be achieved.
Michael Hewson , chief market analyst at CMC Markets UK said: ‘Unfortunately this G20 policy of jam tomorrow won’t solve the more immediate problem in Europe which is one of declining prices and weak economic growth, with the latest German IFO survey expected to follow in the footsteps of last week’s disappointing ZEW survey and slightly below par manufacturing PMI data, in coming in slightly lower than the previous months reading.’
Germany’s closely followed IFO business climate index, due at 9.00am is the only important economic data due today in Europe, the UK, or the US.
HSBC was the biggest FTSE 100 faller early on, dropping 4 per cent, or 26.2p to 628.0 after it said there could be ‘choppy markets’ this year as emerging markets adjust to changing economic circumstances as Europe’s biggest bank reported a 9 per cent rise in annual profit, falling short of analysts’ expectations.
Stocks to Watch include:
RSA – The insurer confirmed it is considering measures to strengthen its balance sheet, including raising capital by way of a rights issue.
ASSOCIATED BRITISH FOODS – The company maintained full-year earnings expectations as a strong first-half performance from its Primark discount fashion chain offset more weakness in its sugar business.
TESCO – The British retailer is to cut prices and modernise more of its stores to try to counter flagging sales in the UK. Philip Clarke, chief executive, will tell investors at a presentation on Tuesday that price cuts and store revamps are needed, The Daily Telegraph reported on Monday.
ROLLS ROYCE – The company has won a $ 90.1million engine contract for US Marine Corp MV-22 aircraft.
BUNZL – The packaging company said it is on track to deliver good growth in 2014.