- FTSE 100 finishes stronger
- Wall Street lower after strong US PMI data
- UK PMI above forecast, but CBI data mixed
4:45pm FTSE closes beneath 8,000
The FTSE 100 slipped closed back beneath the 8,000 marker.
At 7,977 the London benchmark was down 36 points or 0.46%.
3.55pm: US PMIs rise
The US purchasing managers' indexes unexpectedly rose in February after a seven-month stretch of declines, further denting hopes that the Federal Reserve will considering further slowing the pace of US interest rate hikes.
S&P Global's Composite Output Index jumped from a reading of 46.8 in January to 50.2 for February.
Services led the way with the Purchasing Managers' Index for the sector increasing from 46.8 to 50.5 (consensus: 46.9). The PMI for manufacturing meanwhile improved from 46.9 to 47.8 (consensus: 47.0).
According to Chris Williamson, chief business economist at S&P Global Market Intelligence, the business mood had brightened amid signs that inflation had peaked and recession risks had "faded".
On Wall Street, the Dow Jones Industrial Average had extended its fall to 471 points, or 1.4% at 33,355, the S&P 500 also fell 1.4%, and the Nasdaq Composite dropped 1.9%.
In London, around 3.55pm, the FTSE 100 index was 33 points, or 0.4% lower at 7,981.
3.35pm: Not your five-a-day, then
Asda and Morrisons are putting limits on purchases of certain fruit and vegetables as supermarkets face shortages of fresh produce, the BBC News website has reported.
Asda is limiting sales of items such as tomatoes, peppers and salad bags to a maximum quantity of three. Meanwhile, Morrisons will put limits of two on products like cucumbers, the report said.
Extreme weather in Spain and north Africa, including floods, snow and hail, have affected harvests and constrained supplies.
However, Tesco said it was not putting buying limits on fresh produce and a Marks & Spencer spokesman told the BBC that while the group was not immune from supply issues, it had mitigated them by sourcing from different markets.
3.20pm: It's a gas, gas, gas
Spending on gas in the UK has skyrocketed by £50bn to £60bn in the past year since Russia invaded Ukraine, according to the Energy & Climate Intelligence Unit.
By February 24, a year after the war began, the UK will have spent between £60bn to £70bn on wholesale gas, far higher than the £10bn to £20bn paid typically before the invasion.
Annual spending on gas per household rose from £200 to £1,000, analysts from the group estimated, an increase of 400%, although much of this was footed by public funding.
Wholesale gas prices increased from US$4.60 per British thermal unit following the start of the war, to a peak of US$9.71 in August, a rise of over 110% - although these have now fallen to pre-invasion levels.
2.50pm: New York nervous
The FTSE 100 index remained weak but off lows in mid-afternoon trade as US stocks fell at the open after a long weekend as investors digested disappointing earnings from big-box retailers Walmart and Home Depot and cautiously awaited minutes from the last Federal Reserve policy meeting, due tomorrow.
FOREX.com market analyst Fiona Cincotta noted that stocks had fallen as weak Walmart and Home Depot guidance had knocked risk sentiment, amid concerns about a more hawkish Fed.
“US markets are set to extend losses from last week amid ongoing concerns that the Federal Reserve will need to raise interest rates higher and for longer in order to tame high inflation after a series of stronger-than-expected macro data releases last week, including hotter-than-forecast inflation,” Cincotta said.
“Separately geopolitical concerns are back under the spotlight as President Putin gave a keynote speech, which showed no hint of the Ukraine war coming to an end soon. Instead, Putin threatened the west with a nuclear response, hurting risk appetite.”
Around 20 minutes after the New York market open, the Dow Jones Industrial Average was down 281 points or 0.9% at 33,585 points, the S&P 500 had shed 0.9%, and the Nasdaq Composite dropped 1.1%.
In London, around 2.50pm, the FTSE 100 index was 29 points, or 0.4% lower at 7,984.
2.40pm: Scottish politics gambles
Leading bookmaker William Hill has made Huma Yousaf the heavy favourite to replace Nicola Sturgeon as Scotland's First Minister.
The Secretary for Health and Social Care is the 4/9 frontrunner to assume the post, having been as high as 10/1 when Sturgeon first announced her resignation last week.
In a statement, William Hill spokesperson, Lee Phelps, said: “The race for SNP leadership has taken a twist in recent days, with Humza Yousaf now the outright favourite to replace Nicola Sturgeon as Scottish First Minister. The Secretary for Health and Social Care was a 10/1 shot last week to assume the role but now finds himself odds-on with us at 4/9.
“The other two candidates to launch their campaigns, Kate Forbes and Ash Regan, are 9/4 and 9/2 respectively to land the job, with more clarity expected in the coming days.”
2.30pm: Four days good
Dozens of British employers trialing a four-day working week have mostly decided to stick with it after a pilot hailed as a breakthrough by campaigners for better work-life balance, Reuters reported.
Employees at 61 companies across Britain worked an average of 34 hours across four days between June and December 2022, while earning their existing salary. Of those, 56 companies, or 92%, opted to continue like that, 18 of them permanently.
The trial is the largest in the world, according to Autonomy, a British-based research organisation which published the report alongside a group of academics and with backing from New Zealand-based group 4 Day Week Global.
2.20pm: Some Risers and Fallers in London today
UK Oil & Gas PLC up 20% to 0.73p: The UK onshore oil firm unveiled a new review of the Loxley gas discovery, near Guildford, which details the potential economic value of the project. Loxley could be worth up to £124mln net to UKOG, in the ‘mid-case’ scenario, the company said.
Blancco Technology Group PLC up 17% to 191p - The data erasure and mobile lifecycle solutions provider's share rose after it announced strong growth in revenue and profits for the first six months and said it is confident of meeting its full-year expectations. In the first half to 31 December 2022, revenue grew by 16% at constant exchange rates to £24mln, with underlying profit (adjusted EBITDA) increasing to £8mln from £6.4mln in the same period the year before.
ZOO Digital PLC up 12.8% at 185p - The company's share rose after it revealed a new contract with a "major Hollywood studio". ZOO told investors it is now operating as a key vendor for a major content producer to support their content localisation needs. For contractual reasons, the identity of the new Hollywood client cannot be disclosed, the company said.
Aurrigo International PLC up 7% at 123.50p - The AIM-quoted transport tech firm shares climbed as it inked a formal agreement with Singapore’s Changi Airport Group. The deal sets out terms for an ongoing partnership to jointly develop and test autonomous vehicles, the ‘Auto-Dolly’ and the ‘Auto-DollyTug’, along with an airport simulation software platform called ‘Auto-Sim’.
Versarien PLC down 14.5% at 5.69p -The company told investors it remains confident of the environmental and commercial benefits of its graphene technologies, as it reported financial results covering an eighteen-month period that saw challenging market conditions which have delayed commercialisation. "The current macro-economic conditions combined with the disruptive nature of our products has delayed the commercialisation we were anticipating,” said chief executive Neil Ricketts.
Springfield Properties PLC down 6% at 82.50p- The Scotland-based housebuilder’s interim results showed t the group implemented £3mln in cost-cutting measures, but margins still saw a significant impact from build-cost inflation, particularly on fixed-price contracts in affordable housing. Chief executive Innes Smith noted a “challenging period for the housebuilding industry with significant headwinds having a combined effect”.
GB Group PLC down 3% at 333.80p - The digital location, identification and fraud software company's shares fell after a trading update said “challenging conditions” continued into the second half of the year. Specifically, the group said issues have persisted for its cryptocurrency and internet economy customers.
1.00pm: US markets seen lower
Wall Street is expected to start the holiday-shortened trading week lower as investors look to tomorrow’s release of the minutes of the most recent meeting of the Federal Reserve’s Open Market Committee (FOMC) for clues into the outlook for monetary policy as inflation remains stubbornly high.
Futures for the Dow Jones Industrial Average (DJIA) fell 0.8% in Tuesday pre-market trading, while those for the broader S&P 500 index also declined 0.8%, and contracts for the Nasdaq-100 shed 0.9%.
US markets ended mixed ahead of the Presidents’ Day long weekend, with the DJIA closing 0.4% higher at 33,827 on Friday, while the Nasdaq Composite lost 0.6% to 11,787 and the S&P 500 shed 0.3% to 4,079. The small-cap tracking Russell 2000 rose 0.2% to 1,945.
“The market feels like it is in a holding pattern right now as investors await the next meeting of the US Federal Reserve in a month’s time,” commented AJ Bell investment director Russ Mould. “Hints a 50 basis-point rate hike could be in the offing have helped sour sentiment a little but confirmation could really undermine investor confidence."
“In the meantime, a great guessing game is likely to take place with the Fed minutes, updated US GDP figures for the fourth quarter and core inflation data all providing some clues on the likely trajectory of interest rate policy later this week," he added.
Markets are currently pricing a higher terminal interest rate of about 5.3% for July, with the 2023 rate curve remaining above 5% as investors abandon hopes of rate cuts this year, TickMill Group’s Market Analyst Patrick Munnelly said.
“With the US inflation backdrop remaining stubbornly sticky, combined with the robustness of the employment landscape, it is likely the Fed minutes will confirm that the Open Market Committee are poised to keep the pedal to the metal on the higher-for-longer rates mantra," Munnelly added.
Today, quarterly earnings releases from Walmart and Home Depot will provide more insight into the health of the US consumer, while Medtronic, Palo Alto Networks and Molson Coors are also due to report.
12.25pm: CBI survey shows UK factories report falling output and orders in February
The optimism from the PMI figures earlier has been reduced a touch after the CBI reported that manufacturing output and orders have dropped.
The industry body’s latest healthcheck on UK factories has found that a net balance of 16% of manufacturers reported a drop in output volumes in the three months to February.
The February CBI Industrial Trends Survey found that output volumes fell in the three months to February, and at the fastest pace since September 2020. Output is expected to rise moderately in the three months to May. #ITS pic.twitter.com/dkhysCvYH0
— CBI Economics (@CBI_Economics) February 21, 2023
That was the fastest fall in manufacturing output since September 2020 and was down from -1% in the three months to January, and “a significant disappointment to last month’s expectations of +19%,” the CBI said.
11.40am: Pound rallies after strong PMI figures
The British pound edged up toward US$1.21, recovering from a 6-week low of US$1.19 hit on February 17, 2023, as investors warmed to stronger-than-expected PMI data.
Flash figures showed output for private sector businesses rebounded after six months of contraction, with both the manufacturing and service sectors achieving a return to growth, encouraging resilience of the economy.
The better-than-expected figures boosted hopes that the UK would avoid recession.
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11.05am: Eurozone surprises on the upside
ING Economics noted that the eurozone economy continues to surprise on the upside.
"The PMI paints a picture of an economy that is bouncing back from the sluggish performance in recent months, which is mainly driven by fading supply-side problems," it said.
"This may be giving a larger push to economic activity than initially expected as backlogs of orders are now going into production. Also helpful is that the energy crisis has moved into an undoubtedly milder phase with market gas prices now about a third of what they were only in mid-December.
"The survey also suggests that demand is improving, which is surprising given the downturn in domestic demand in the fourth quarter in most large eurozone economies.
"Inflationary pressures continue to ease, but mainly on the manufacturing side.
"The combination of better-than-expected economic activity at the start of the year and service sector inflationary pressures which remain elevated will likely keep the ECB in hawkish mode," ING concluded.
Meanwhile, the FTSE 100 has stablised for now at 7,993.65, down 20.66 points, or 0.26%.
10.30am: Too early to say UK has avoided recession
Not quite time to pop the champagne corks following better-than-expected UK PMI figures.
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics said: “It would be premature to conclude from the jump in the composite PMI to well above 50 in February that the economy has avoided a recession.”
She added: “The PMI is only a rough guide to activity and often is excessively influenced by sentiment. Right now, purchasing managers probably are relieved that the economic outlook is not quite as bad as seemed likely in Q4, given that interest rates expectations and wholesale energy prices have fallen since then, while equity prices have picked up.
“But we still think that GDP will drop in both Q1 and Q2, as households’ real disposable incomes continue to decline in response to further increases in consumer energy prices, and as households refinancing mortgages continue to cut back.”
Dickens pointed out that the composite PMI also does not include the retail sector, which is at the sharp end of the pullback in households’ real expenditure, nor the construction sector, which will fare worse than most in response to the jump in borrowing costs.
Despite expecting a fall in GDP in Q1 and Q2, “our forecast for quarter-on-quarter declines of 0.3% and 0.6%, respectively, now looks too downbeat,” Dickens concluded.
But the upbeat PMI did support equities which have rallied from their lows, with the FTSE 100 now down 22 points, well off earlier lows.
9.55am: HSBC guidance disappoints Numis
Shares in HSBC Holdings PLC (LSE:HSBA) remain lower despite better-than-expected fourth-quarter profits.
Analysts at Numis Securities noted underlying pre-tax profits of US$6.83bn in the quarter were 7% above consensus.
This was driven by an 11% beat at pre-provision profit level partly offset by an above-consensus impairment charge of US$1.43bn against US$1.06bn reflecting further provisions for China CRE exposure.
But they added: “While aspects of these numbers are positive, there is room for disappointment on 2023 guidance with no change in the net interest income outlook of >US$36bn (despite a strong Q4 2022) and costs expected to rise by c.3% compared to current consensus a little below 2%.”
9.40am: UK PMI prints better than expected
Encouraging figures from the UK’s PMI readings with the latest figures showing the private sector returned to growth in February.
At 53.0 in February, the headline seasonally adjusted S&P Global / CIPS Flash UK Composite Output Index registered above the 50.0 no-change value for the first time since July 2022. It was also a sharp improvement on January’s reading of 48.5.
The Flash UK manufacturing PMI at 49.2 (January: 47.0) hit a seven-month high while the flash UK Services PMI business activity index reached 53.3, up from 48.7 in January, an eight-month high.
The figures beat City expectations across the board.
UK business activity surged back into life in February, according to the flash PMI, displaying renewed growth after six months of decline. The composite PMI rose from 48.5 to 53.0, registering the strongest expansion since last June and smashing expectations of a reading of 49.2 pic.twitter.com/WjoZzLf1ZS
— Chris Williamson (@WilliamsonChris) February 21, 2023
The report showed that UK private sector firms signalled a solid rebound in business activity during February, which ended a six-month period of falling output.
Both the manufacturing and service sectors achieved a return to growth, with the latter posting the faster rate of expansion.
Survey respondents cited rising customer demand and improving business confidence in February, due to lower economic uncertainty, fewer supply shortages and falling inflation.
February data pointed to the slowest overall increase in average cost burdens since April 2021, S&P said.
That said, prices charged inflation eased only fractionally, especially in the service economy. Many firms commented on the need to pass on higher wages, food costs and energy bills.
Commenting on the flash PMI data, Chris Williamson, chief business economist at S&P Global Market Intelligence said: “Much better than anticipated PMI data for February indicate encouraging resilience of the economy in the face of headwinds which include rising interest rates, the ongoing cost of living crisis, labour shortages and strikes.
“While many companies continue to report tough operating conditions, especially in the manufacturing sector, the broader business mood has been buoyed by signs of inflation peaking, supply chains improving and recession risks easing. The stress created by last autumn's mini budget is also continuing to work its way out of the financial system.”
Together with the improved picture in the Eurozone this has helped pull the FTSE 100 off its lows, now at 7,990.07, down 24.24 points.
9.15am: JD Sports in fashion at Goldman Sachs
Shares in JD Sports Fashion PLC (LSE:JD.) received a boost from Goldman Sachs which added the sports retailer to its Conviction List and raised its 12-month price target to 270p from 230p.
The US investment bank's analysts commented after further consideration of the company’s Capital Market Day at which it outlined its new strategy and financial targets for the next five years.
These are double digits on sales compound annual growth rate, market share in key regions and pre-tax profit margin, Goldman's analysts noted.
“We are slightly more conservative given current consumer demand headwinds, and we forecast group revenue growth to compound 9% pa, driving an 11.5% FY23-27E PBT CAGR,” they said
Goldman has a ‘buy’ rating on JD Sports highlighting its high growth/high cash-generating model. Shares bucked the weaker market rising 1.4% to 181.95p.
9.10am: Eurozone PMI jumps in February
A pick-up in service sector growth has driven eurozone business activity growth to a nine-month high, figures released showed.
The S&P Global ‘flash’ Eurozone PMI has risen for the fourth month running, rising to 52.3 in February from January’s 50.3 (any reading over 50 shows growth). The figure topped expectations of 50.7.
#Eurozone flash PMI reaches 9-month high of 52.3 in Feb (50.3 in Jan), as services activity performs strongly and manufacturing returns to growth. The data are consistent with rising #GDP in the 1st quarter so far. Read more: https://t.co/RT2iYtsY7t pic.twitter.com/nAKtJGHJG0
— S&P Global PMI™ (@SPGlobalPMI) February 21, 2023
S&P Global reported that eurozone service sector firms achieved an improved performance, while manufacturing output returned to growth.
Rising demand, healing supply chains, order book backlog reduction and improved confidence underpinned the upturn. The data suggests that the economy expanding in the first quarter so far, with employment also continuing to rise.
Selling price inflation slowed to a 16-month low, although remained “stubbornly high”, especially in the service sector, in part linked to the impact of higher wage costs.
9.00am: FTSE tumbles at the open
The Footsie remained on the backfoot in early exchanges, slipping well below the 8,000 mark, as investors digested a hefty batch of results and as PMI prints across Europe began to flow.
At 9.00am, London's blue chip index was at 7,956.57, down 57.74 points, or 0.72% while the broader FTSE 250 was at 19,972.26, down 126.15 points, or 0.63%.
Victoria Scholar, head of investment, interactive investor said: “Risk-off sentiment across Europe has pushed the FTSE 100 back to just around the psychological 8,000 mark.
“France’s manufacturing flash PMI for February slipped below the key 50 boom-bust divide to 47.9 versus 50.5 in January. However, its services reading improved to 52.8 in February versus 49.4 in January, beating expectations for 49.9. Germany’s flash manufacturing PMI fell to 46.5 in February versus 47.3 in January. Its services reading also improved to 51.3 versus 50.7 in January.”
UK figures are due at 9.30am.
Other economic data reported showed an improvement in the UK’s public finances in January driven by record self-assessment returns.
Danni Hewson, AJ Bell head of financial analysis, noted: “It’s a record haul as people filed their self-assessment returns after a year when Covid had finally been shown the door.
“The boon delivered the Treasury an unexpected gift, a month when the government actually spent less than it brought in, something most economists hadn’t seen coming.”
But she cautioned: “January should be a month that sets the country’s finances up for the new year and when you compare the surplus with that generated last year, despite an increase in tax receipts, the picture doesn’t look quite so rosy and doesn’t bode well for anyone hoping to see a few a rabbits jump out of Jeremey Hunt’s hat next month.”
Smith & Nephew was top of the FTSE 100 risers, up 4.1%, despite a fall in full-year profits. Investors took heart from news that medical technology firm had made good early progress in delivering its 12 point strategic plan launched last year.
HSBC Holdings PLC (LSE:HSBA) remained a weak feature, down 1.7%, even though annual profits were at the top end of City expectations and the Asia-focused lender said it was looking at paying a special dividend with the proceeds from the sale of HSBC Canada.
Joshua Warner, market analyst at City Index noted: “HSBC continued to put more money aside to its reserves and book large levels of credit losses and impairments thanks to its exposure to China’s commercial real estate market and the potential for more loans to turn sour given the uncertain economic outlook.
“Plus, while costs fell in 2022 despite the inflationary environment, markets will be disappointed that HSBC expects adjusted expenses to grow around 3% in 2023 considering they believed they could decline further this year.”
Intercontinental Hotels Group also slipped as full-year revenue of US$1.84bn fell short of analysts’ expectations.
“Despite strong profit growth and a more than doubling of its existing share buyback announced in August, traders are selling the stock on the back of its disappointing top line figure,” said Victoria Scholar.
“Although the hotel group benefitted from the release of pent-up demand post-pandemic last year with stronger occupancy rates and higher prices, IHG like many businesses has been grappling with cost pressures as well as a softer consumer as inflation squeezes household budgets," she added.
JD Sports Fashion PLC (LSE:JD.) rose 1.2% as Goldman Sachs raised its price target to 270p and added the sports retailer to its Conviction List.
8.25am: UK public finances improve in January
Public sector net borrowing in January 2023 was in surplus by £5.4bn, which was a £7.1bn smaller surplus than in January 2022 but a £5.0bn larger surplus than forecast by the Office for Budget Responsibility (OBR).
Figures from the Office for National Statistics showed self-assessed income tax receipts were £21.9bn in January 2023, which was the highest January figure since monthly records began in April 1999 and £5.5bn or one-third higher than in January 2022.
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January’s high annual self-assessed tax receipts were partly offset by substantial spending on energy support schemes and large one-off payments relating to historic customs duties owed to the EU.
Central government debt interest payable was £6.7bn in January 2023, which was the highest January figure since monthly records began in April 1997; the recent increases are largely because of the effect of Retail Prices Index (RPI) changes on index-linked gilts.
In the financial year to January 2023, the public sector borrowed £116.9bn, which was £7.0bn more than in the same period last year but £30.6bn less than forecast by the OBR.
8.15am: FTSE 100 lower despite improved UK public finances
FTSE 100 opened lower on Tuesday despite better-than-expected news on UK borrowing and ahead of a raft of PMI announcements.
At 8.15am, London's blue chip index was at 7,993.01, down 21.30 points, or 0.27%.
Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA said: “This week may not be as all-action as others we've experienced this month but there is still plenty for investors to get their teeth stuck into.
“Today is littered with economic releases throughout, with the PMIs being a key feature of that. At a time of such uncertainty over inflation, interest rates, and the economy, these forward-looking business surveys carry extra weight.
“And what's more, they're expected to show businesses are becoming less pessimistic which would be a small win but a win nonetheless.”
There was better news on UK public sector net borrowing which in January 2023 was in surplus by £5.4bn, £7.1bn smaller than in January 2022 but £5.0bn larger than forecast by the Office for Budget Responsibility (OBR).
Self-assessed income tax receipts were £21.9bn in January, which was the highest figure for the month since monthly records began back in 1999. It was up from £16.4bn a year before.
Samuel Tombs at Pantheon Macroeconomic noted: “The government ran a smaller surplus than usual in January, reflecting large outlays for the energy price support, but the data are much better than the OBR had expected, leaving the chancellor in a comfortable position ahead of the budget.”
Capital Economics analysts commented: "January's public finances figures suggest the chancellor may have scope for some giveaways in his Budget on 15th March.”
On a busy day of results, HSBC Holdings PLC (LSE:HSBA) fell 1.1% despite announcing plans for a special dividend from the proceeds of the sale of HSBC Canada alongside annual results. Profits fell at the Asia-focused bank but still topped City expectations.
HSBC chief executive Noel Quinn said the results reflected, "A strong net interest income performance reflected higher global interest rates, but there was also good underlying growth across the business in key areas, particularly those linked to our international network."
Richard Hunter, head of markets at interactive investor, commented: “HSBC’s sheer scale and financial strength continue to ease the costs of its transformation to a more Asian-focused bank, while retaining a global presence in those regions which meet its targets.”
But Smith & Nephew soared 6.1% despite a fall in annual operating profits as margins dipped.
The global medical technology company said operating profit margins slipped to 8.6% from 11.4% reflecting higher inflation in freight and logistics, the impact of China VBP, as well as sales and marketing expenditure levels returning to more normal levels.
As a result, while revenue for the year to December 31, 20213, was flat at US$5.2bn, operating profits fell to £450mln from £593mln.
InterContinental Hotels PLC was another on the backfoot with shares down 2.1%. It reported improved annual profit and revenue, and announced a new US$750mln share buyback.
In 2022, the hotel and resort chain posted a pre-tax profit of US$540mln, up 50% from US$361mln the previous year. Revenue totalled US$3.89bn in 2022, up 34% from US$2.91bn in 2021.
7.55am: Profits fall at Smith & Nephew
Smith & Nephew PLC (LSE:SN) reported flat annual revenue but declining margins meant operating profit fell sharply.
The global medical technology company said operating profit margins slipped to 8.6% from 11.4% reflecting higher inflation in freight and logistics, the impact of China VBP, as well as sales and marketing expenditure levels returning to more normal levels.
As a result, while revenue for the year to December 31, 2023, was flat at US$5.2bn, operating profits fell to £450mln from £593mln.
Earnings per share were 25.5 cents more than halved from 2021’s 59.8 cents and the firm left the full year dividend unchanged at 37.5 cents.
Smith & Nephew reported good early progress in delivering its 12 point plan launched last year.
It hopes to improve execution and drive strategy for growth, focused on fixing Orthopaedics, improving productivity, and accelerating growth in Advanced Wound Management and Sports Medicine.
Looking ahead, Smith & Nephew forecast underlying revenue growth expected in the range of 5.0% to 6.0%, trading profit margin of least 17.5% (2022 17.3%).
In the medium term, the company is targeting 5%-plus underlying revenue growth driven by return on innovation investments and execution of 12-point plan and trading profit margin expansion to at least 20% in 2025 driven by productivity improvements.
The company has already said Rupert Soames will succeed Roberto Quarta as its chair.
7.35am: HSBC eyes special dividend, profits fall
The banking reporting continues and today it is HSBC Holding PLC's turn to update investors.
The bank announced plans for a special pay-out to shareholders as it reported a fall in annual profits which were at the top end of City expectations.
Chief Executive Noel Quinn said the results reflected: "A strong net interest income performance reflected higher global interest rates, but there was also good underlying growth across the business in key areas, particularly those linked to our international network."
The Asia-focused bank posted pre-tax profit in the year to December 31, 2023, of US$17.53bn, down 7.3%, from US$18.91bn a year ago slightly better than company-compiled market consensus of US$17.49bn.
Quinn said: “This was due to a net expected credit loss charge of US$3.6bn compared with a net release of US$900mln last year, as well as the impairment of US$2.4bn relating to the planned sale of our retail banking operations in France."
Net interest income rose to US$32.61bn from US$26.49bn in 2021 ahead of the market consensus of US$32.04bn and ahead of HSBC's own guidance of US$32bn.
At the end of the year, the bank's common equity tier 1 capital ratio was 14.2%, down from 15.8% a year before.
The FTSE 100-listed lender paid a second interim dividend of US$0.23 per share, making a total for 2022 of US$0.32 per share. It is also considering the payment of a special dividend of $0.21 per share as a priority use of the proceeds generated by completion of the sale of HSBC Canada.
The payment would take place in early 2024, HSBC said, with any additional surplus capital put towards organic growth and investment opportunities, as well as potential share buybacks.
Looking ahead and the bank remains confident of achieving its return on average tangible equity target of at least 12% for 2023 onwards and expects net interest income of at least US$36bn in 2023.
ECL charges are expected to be around 40bps in 2023, cost growth 3% and the CET1 ratio “within our medium-term target range of 14% to 14.5%.” HSBC also intends a dividend pay-out ratio of 50% for 2023 and 2024.
7.00am: FTSE seen lower
FTSE 100 is expected to open on the back foot ahead of the latest UK borrowing numbers and a raft of PMI figures.
Spread betting companies are calling the lead index down by around 12 points.
Michael Hewson chief market analyst at CMC Markets said: “Today’s flash PMIs from France, Germany and the UK are set to point to a further pickup in economic activity, with manufacturing expected to show an improvement to 51, 48.1 and 47.5 respectively.”
“Services sector activity has seen a similar improvement albeit from slightly lower levels with French services activity expected to improve to 49.8, from 49.4, Germany to 51, from 50.7 and the UK to edge up to 49.2 from 48," he added.
The results season continues with figures due from HSBC Holdings PLC (LSE:HSBA) and InterContinental Hotels Group PLC amongst others.