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HSBC and BHP weigh on FTSE

The FTSE 100 is marginally in the red as a few worse-than-expected corporate results have weighed on the British benchmark. 

The rest of Europe is in positive territory as the optimist mood has returned after yesterday’s decline. Overall dealers are still cautiously optimistic about the health of European equities, and the acid test will be when the US markets re-open at lunchtime.

BHP Billiton had its best first-half since 2014, but the jump in profits failed to meet expectations. Earnings increased by 25% to $4.05 billion, while analysts were anticipating $4.3 billion. The mega miner revealed a 38% rise in dividend, and a 23% decline in net debt. Activist investor Elliott Advisors own a 5.4% stake in the company, and they feel BHP could save $22 billion by introducing a simpler corporate structure. The mining firm claims the cost to alter the corporate structure would exceed the potential savings. Having Elliott Advisors waiting in the wings, will keep BHP’s management on their toes. The stock is down 3.3%.

HSBC revealed an increase in revenues and profits, but thy came in below expectations. Trading revenues were lower by 24% - which is in line with its peers. The bank couldn’t extend its share buyback scheme due to rules on the exchange, and the dividend was unchanged from last year. Cost cutting has gone according to plan and so has a reduction in risk-weighted assets.  Stuart Gulliver is stepping down as CEO and it is fair to say ‘pivot to Asia’ plan that he set out in 2015 has worked. The share price is down 4.4%.

EUR/USD is in the red today as a dip in German PPI and a firmer US dollar hut the currency pair. German PPI fell to 2.1% in January from 2.3% in December. The slide in input prices could be a result of weak demand which doesn’t bode well for the German economy. PPI tends to be a leading indicator for inflation, and CPI softened recently. We might be in for a period of underwhelming inflation, which could weigh on the euro.

The US dollar index has hit a one week high, and GBP/USD is feeling the pain this morning. The bounce back in the greenback continues, and we could see volumes pick up today as American traders will be back to work today. The UK Confederation of British Industry (CBI) industrial order expectations will be released at 11am (UK time) and the consensus is for a reading of 12.

We are expecting the Dow Jones to open down 159 points at 25,060 and we are calling the S&P 500 down 15 points at 2717.

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