- FTSE 100 closes 60 points lower
- HSBC falls 9% on "messy" results
- easyJet set to be promoted to FTSE 100
- BT Tower to be made into hotel
15:59: FTSE 100 closes 60 points lower as HSBC results fail to impress
The FTSE 100 closed around 60 points lower after several weak results from blue-chip companies pushed the index lower.
HSBC was the standout faller, closing the day almost 9% lower after it reported a "messy" and "noisy" set of results.
Fourth quarter profits sunk around 80% after it suffered a one-off impairment relating to Chinese investment, leaving analysts questioning whether it should stay in the Asian country.
Other early fallers included Glencore which dropped around 5% after it cut its dividends and experienced a profit slump in the third quarter.
However, by the afternoon it had recouped most of its losses to fall by only 1%.
Other notable fallers included betting duo Entain (-3.5%) and Flutter (-2%) as well as Centrica (2%).
Risers were few and far between, with none of the big chips able to trade higher than 2%.
Beazley experienced a slight lift after it announced a new cyber risk management firm, however, it closed only 1.3% higher.
In the FTSE 250, a rally from Greencoat UK Wind (+4%) and Octopus Renewables Infrastructure (4.5%) helped offset drops from Bytes Technology (-11%), Close Brothers (-8%) and Darktrace (-5%).
The secondary index closed out Wednesday around 3 points higher.
15.35pm: Britain's growth to remain slow in 2024, UK's top economists believe
UK economic growth is expected to remain weak this year as inflation continues to fall, the Treasury Committee have been told.
In a hearing on economic estimates, which both the IMF and OECD refused to attend, MPs questioned some of the UK's top economists on their forecasts.
The Centre for Economics and Business Research (CEBR) boss Nina Skero said the group is expecting growth of 1.1% in 2024.
Skero also thinks inflation will slow, but not to the 2% rate the Bank of England is predicting.
Instead, the CEBR predicts headline inflation will be at 2.2% by the end of the year.
Charlie Bean, a former Bank of England and OBR economist believes output from the UK will "pretty much flatline" before it picks up later this year.
He also reckons inflation will reach the 2% mark by Spring and agrees with the BoE that the figure will pick up later in 2024.
Barclays' chief economist Jack Meaning also spoke with the committee, where he said that growth will be "pretty stagnant" in the first quarter.
He doesn't believe the recession will continue on and predicts growth will begin to speed up at the start of 2025.
Meaning also thinks inflation will be below 2% in April as the energy price cap kicks in, with the rate keeping around or below this figure until the first half of next year.
14:59pm: Europe needs UK in EV battle with China, says industry boss
British and European car makers have to collaborate if they are to avoid being swept away by a tide of Chinese electric vehicle imports, the boss of Renault has warned.
Luca de Meo, chief executive of the French car maker, accused Europe of punishing companies with fines and deadlines while China and the US were throwing subsidies at theirs.
Shenzhen-based BYD is spearheading the EV drive, having become embroiled in a fierce price war in its market with a local rival and Elon Musk’s Tesla, which is a major brand at the top end of the market.
Speaking to magazine Autocar, Meo said: “The UK may no longer be part of the EU, but on this issue I think we face the same challenges together.
“It is very simple: strip out the automotive industry and Europe will find itself with a structural trade deficit."
14.41pm: US markets open lower as Wall Street holds breath for Nvidia results
US markets have opened lower with the Dow Jones down by 160 points at 38,400, while the S&P opened down 15 points at around 4,960.
Chipmaker and Wall Street favourite Nvidia is also trading around 1% lower ahead of its trading update after the markets close tonight.
Nvidia is not only the US market's most traded stock, but it's share price gains this year have been greater than the next two best performers, Microsoft and Meta, combined.
XTB analysts said: " Since Nvidia is so important for the direction of overall stock markets, the outcome of this evening’s report could be decisive in where stocks go next.
"Will it see more competition, and could this eat away at revenues in the future? If yes, then we could see a lot of volatility for markets in the coming days. But, if Nvidia signals that the future is rosy, then we could expect another leg higher in the recent rally."
Everyone's holding their breath today pic.twitter.com/SdhKGreyQw
— Morning Brew ☕️ (@MorningBrew) February 21, 2024
14:23pm: HSBC may need to ditch China, says analyst
HSBC may need to pivot away from China, after its "messy" earnings led to shares sinking around 8% on Wednesday, analysts believe.
XTB research director Kathleen Brooks said: "The HSBC boss said China’s real estate market has bottomed, however, he didn’t sound too bullish on China, where the company does a large portion of business.
"Interestingly, pre-tax profit is now higher for HSBC in India than China, which is a real sign of the times, and also highlights how the bank may want to pivot away from China in the coming quarters."
Despite posting record revenues and a return on tangible equity in the mid-teens, economists at XTB pointed out that sales were down by slightly under £4 billion when compared with market expectations.
Earnings saw an 80% drop due to an impairment charge from a Chinese bank holding, taking investors' attention away from news that capital returns would reach their highest level since 2008.
14.05pm: MP blasts IMF as it refuses to analyse UK forecasts
MP Harriet Baldwin has criticised the International Monetary Fund over its decision to refuse the government access to its forecasts for the UK's economic growth.
Britain is expected to see economic growth 0.6%, the IMF predicted, placing it as the slowest growing country in the G7, behind only Germany.
The Treasury committee, which is chaired by Baldwin, will quiz leading economists over these predictions to further help shape government policy going forward.
Baldwin said: "We also invited the OECD and the IMF to this session on economic forecasting.
"I’m disappointed neither has accepted our invitation to come to Westminster ahead of the Spring Budget and discuss the assumptions which underpin their forecasts on the UK economy.
"IMF’s outright refusal to let us scrutinise their forecasts of the UK economy in public is infuriating. Yet they continue to utter public pronouncements about the UK from their perch in Washington. As the IMF is a public body partly funded by the UK as a shareholder, I find this incredible."
13.13pm: Water companies push back against sewage dividend ban plan
Any move to stop water companies from paying dividends due to sewage dumping would be catastrophic for the sector, industry bosses have warned.
Environment Secretary Steve Barclay mooted the idea of a dividend ban last month alongside a proposal to cap bonuses of bosses of the utilities that breach spill guidelines.
New powers handed to the regulator next year will include the right to a “cash lock-up” depending on the severity of any spillage, unnamed sources told Bloomberg.
Water company chiefs, though, have responded that capping dividends would have a detrimental impact by making it too expensive to raise funds to carry out the work required to improve pipe infrastructure and stop spills in the first place.
Listed water companies United Utilities and Severn Trent are down 0.7% and 1.1%, respectively.
13.03pm: US markets to open lower as investors await Nvidia earnings
US markets are set to open lower on Wednesday, with the Dow Jones down around 75 points at around 38,500 points and the S&P around 30 points lower at 4,975.
However, the key focus for Wall Street investors will be how star-child Nvidia performs, with its results scheduled to be released at 21:20GMT/16:20EST.
Yesterday, the chipmaker became the US's most traded stock, overtaking Tesla.
However, some pre-earnings anxiety saw it trade around 4% lower, before suffering a further 2% drop in the aftermarket.
PRIMER: Nvidia (NVDA) scheduled to report Q4 FY24 earnings at 21:20GMT/16:20EST; conference call at 22:00GMT/17:00EST ???????? pic.twitter.com/0axQm7SpMM
— Newsquawk (@Newsquawk) February 21, 2024
12.44pm: Beazley leads FTSE 100 risers after launching cyber risk management firm
Beazley, the insurance company, is leading the FTSE 100 risers on Wednesday after launching a new cyber risk management firm.
Shares lifted around 2% after the group revealed it had merged its own in-house cyber services team with its subsidiary and fellow cyber security firm Lodestone.
Beazley Security will look to combine its parent company's risk management services with the cyber security services offered by Lodestone.
Alton Kizzaiah, the current CEO of Lodestone, will take up leadership of the new firm, with him reporting directly to Beazley's head of cyber risks.
“Building cyber resilience is top of mind for business leaders and Beazley Security has been created to bring responsive cyber protections to the heart of the fight against ever-evolving threats. I’m excited to lead an outstanding team of specialists committed to providing clients with confidence and peace of mind,” Kizziah said.
12.31am: FTSE 100 holds steady after morning's drop
The FTSE 100 is holding steady with its losses and is down around 65 points.
Leading the index fallers was HSBC, down around 7%, with the bank shedding value after its fourth-quarter profit slumped by around 80%.
“Exposure to Asia has given HSBC a different growth profile than its UK-focused counterparts but it brings risk too and that is writ large in its fourth quarter and full year results," said Danni Hewson, head of financial analysis at AJ Bell.
“The company has been stung by a $3 billion charge on its stake in a Chinese bank and write-downs associated with commercial real estate and the sale of its French business. That’s made the results a bit of a mess and led to a miss on full year forecasts."
Other fallers include Glencore (-3%), Centrica (-3%) and BAE Systems (-2.5%).
On the other hand, strong risers have been few and far between, with a 2% jump for Beazley leading the way.
12.02pm: German economy in "difficult waters"
Germany has scaled back its growth forecasts as it continues to struggle with rampant inflation and a nearing recession.
The government now expects Europe's largest economy to grow by 0.2%, a strong cut from the initial 1.3% forecast.
It was approved by the cabinet on Wednesday during the government's annual economic report, with Robert Habeck, the economy minister, set to provide further details on the decision later today.
"The German economy continues to find itself in difficult waters at the beginning of the year," a draft of the report said, according to Reuters.
High inflation, loss of purchasing power, geopolitical crises and interest rate hikes are all said to be the causes of the reduction.
The FTSE 100 kept relatively steady on the back of the news, still down around 63 points.
11.46am: Manufacturing output slows as selling price inflation soars
Output from UK manufacturers dropped in the three months to February, while prices are expected to head upwards, according to CBI data.
CBI's Industrial Trends Survey said a net balance of 19% of manufacturers saw a fall in output over the quarter to February, worsening on the 10% reported in the three months to January.
Output is expected to lift marginally in the three months to May.
The latest CBI Industrial Trends Survey found that manufacturing output volumes fell in the three months to February at a faster pace than in the quarter to January. Output is expected to rise marginally in the three months to May. #ITS pic.twitter.com/3drEd21zAX
— CBI Economics (@CBI_Economics) February 21, 2024
Conversely, expectations for average selling prices rose in the same period, with 17% of companies lifting the amount they charge.
In January, this figure was at 9%.
Anna Leach, CBI deputy chief economist, said: “UK manufacturing conditions remain challenging, with lower output volumes widely reported across the sector this month. But there were also some hopeful signs.
"Order books improved - in the case of export orders to above their long-run average - and manufacturers continue to expect output to improve in the months ahead."
Expectations for selling price inflation accelerated in February, climbing above their long-run average. Selling price expectations were the strongest since July 2023, but remained well below the multi-decade high seen in 2022. #ITS pic.twitter.com/zq55QWCyxy
— CBI Economics (@CBI_Economics) February 21, 2024
11.30am: easyJet set to join FTSE 100 in next reshuffle
easyJet is set to be promoted to the FTSE 100 in the upcoming quarterly review of the index, with Endeavour Mining dropping into the FTSE 250.
The preliminary report from FTSE Russell, based on data from last Friday, predicts that easyJet will return after falling out of the index during the pandemic when flights were grounded.
easyJet shares have ticked 16% over the last year and the promotion may change founder Stelios Haji-Ioannou's view that the airline needs to pursue a US Nasdaq listing to gain ground on rival Ryanair.
Endeavour Mining will likely be relegated after its shares sunk more than 25% in the last twelve months, due to issues with its chief executive.
Official confirmation of the changes will be made next Wednesday after markets close and will be based on the market capitalisation of companies next Tuesday.
10.53am: FTSE 250 edges higher as Bulmers owner announces buyback
The FTSE 250 lifted around 20 points higher after gains from WAG Payment Solutions (+4.5%) and Greencoat UK Wind (+3%) helped offset losses driven by Darktrace (-8%) and Close Brothers (-5%).
Bulmers and Magners owner C&C Group also lifted around 2% after it launched a €15 million share buyback, equivalent to around 2% of its market cap.
Greg Johnson at Shore Capital said: "The buyback is consistent with the plan set out at the interim results in October last year to return up to €150m to shareholders over the next three financial years.
"Although it has been a challenging period, with the ERP issues appearing behind it, a more stable consumer environment emerging and costs pressures abating, C&C could be positioned for margin recovery from FY25F. Such an opportunity does not appear to be reflected in the current valuation."
Meanwhile, the FTSE 100 has regained some of its losses from this morning, leaving it down around 63 points.
10.04am: Glencore pushes FTSE 100 lower on poor payouts and earnings drop
Mining giant Glencore (-6%) is giving HSBC a run for its money as Wednesday's biggest faller as the FTSE 100 (down 71 points) continues to fall behind 2023 levels.
Mark Crouch, analyst at eToro, said: "Glencore investors will be trying to dig out the positives from this morning’s update. The company has seen earnings halve from a year earlier and investor payouts have also taken a hit, with a halt being placed on buybacks and no plans for a special dividend.
“There was some encouraging news for investors, Glencore's $6.9 billion acquisition of a 77% interest in Canadian company Teck's steelmaking coal business highlights the strength of the balance sheet and is a reminder that the mining giant is no stranger to economic uncertainty and remains on the hunt for profitable opportunities.”
Glencore profits dropped by three-quarters in the year just ended as coal and metal prices fell and trading income was also reduced.
Revenues in 2023 were 15% lower than a year ago at US$217bn, while profits from its production arm were down by 52% and in trading by 46%.
9.54am: Petrol prices to rise as Red Sea attacks continue
Motorists are facing a hike in prices at petrol pumps due to the Houthi attacks on shipping in the Red Sea, the RAC has warned.
Costs to fill an average family car are up by about £2 this month so far with the price of petrol up 3.2p on average to 143.4p per litre and diesel by 4p to 152p.
Prices remain well down from the start of 2024, when petrol was around 157p, noted the motoring organisation.
Crude has been trading above US$80 a barrel for most of the past month and this is starting to deed trough into pump prices as higher priced stocks reach refineries, it added.
On Wednesday, Brent Crude was trading at around US$82 a barrel, down around 0.4%.
9.39am: BT Tower to be made into a hotel
London’s iconic BT Tower is to be sold to MCR Hotels through a £275 million deal as the UK gradually shifts away from analogue communications technology.
BT announced the sale of the grade II listed building in Fitzrovia, London on Wednesday, explaining its role of housing aerials was no longer needed as the country heads to an “all-digital future”.
“We’ve been immensely proud to be the owners of this important landmark since 1984,” BT property director Brent Mathews said.
“It’s played a vital role in carrying the nation’s calls, messages and TV signals, but increasingly we’re delivering content and communication via other means.”
MCR, which owns around 150 hotels, will purchase the building from BT over the coming years as its communications equipment is gradually removed, with the site ultimately being converted into accommodation.
9.29am: King Charles banknotes to be used in June
King Charles banknotes are set to be issued from June 5 2024 onwards, according to the Bank of England.
A portrait of the King will feature on all four notes.
No other changes to the design are planned, meaning security features will also remain the same.
Notes with Queen Elizabeth will remain in circulation, with new versions only being printed to replace worn-out ones or to meet an overall increase in demand.
Today we have announced that banknotes featuring the portrait of King Charles III will be issued from 5 June 2024. For more information on the King Charles III banknotes see here: https://t.co/oBPgbpbXmf pic.twitter.com/hb9jFnBX4M
— Bank of England (@bankofengland) February 21, 2024
9.19am: FTSE 100 continues to tumble; HSBC leads fallers
The FTSE 100, down 60 points, slipped after heavyweight HSBC tumbled 7% after it reported a plunge in fourth-quarter profit.
Also providing downward pressure on the index was BAE Systems, falling around 3% despite reporting better than expected profit on strong sales of its defence goods for the year.
Rio Tinto dropped by 2% following a dip in profits in line with its expectations.
8:53am: Public finance borrowing reaches record surplus in January
More reactions to the UK public finance figures from the ONS earlier, which showed a record surplus of £16.7 billion for January, more than double that from a year earlier.
This last set of public borrowing numbers before the Budget on 6 March, shows borrowing in the current tax year is on course to come in below the OBR forecast.
However, the Chancellor's attention will be focused more on likely headroom against his fiscal rules, says Martin Beck, chief economic advisor to the EY ITEM Club.
“On that issue, the market curve for interest rates over the next few years is lower than that adopted by the OBR in November, which should cut forecast spending on debt interest.
“And the OBR’s new forecast will incorporate the Office for National Statistics’ (ONS) new and bigger population projections which, all else equal, should raise projections for GDP, employment and tax receipts."
But against these positives, Beck notes that investors have adjusted their expectations for rate cuts, impacting the OBR forecast, which now faces challenges from a weaker-than-expected economy in Q4 2023 and lower inflation affecting tax revenue.
On balance, Beck said ITEM Club thinks the Chancellor “will have room to manoeuvre, but major tax cuts are looking less likely.”
Sam Tombs at Pantheon Macroeconomics predicted the OBR will revise down its forecast for debt interest payments in 2024/25 by about £14 billion and "might make other revisions to its economic forecasts which will squeeze the Chancellor’s fiscal headroom".
"But the Chancellor can pencil-in even more implausible figures for future levels of non-interest spending in order to hit his self-imposed target, for the debt-to-GDP ratio to be projected to be falling in five years’ time.
"So the real limit on Mr Hunt’s scope to deliver the tax cuts his party’s MPs are clamouring for is the gilt market’s willingness to absorb higher issuance, and any desire he has to avoid the MPC delaying interest rate cuts."
Balancing these conflicting influences, Tombs said he thinks Hunt will announce in the Budget another package of consumer-focussed tax cuts, amounting to a £20 billion giveaway in 2024/25.
"The OBR’s multipliers imply those tax cuts would boost GDP by about 0.25% in 2024/25, adding some extra fuel to a strengthening economic recovery, and bolstering the case for the MPC to reduce Bank Rate only gradually this year," he added.
8.21am: FTSE starts deep in the red
The FTSE 100 has tumbled lower in Wednesday's early trading, falling 46 points or 0.6% to 7673, despite some encouraging news from UK public finances.
Weighing on the index is a sharp fall for its third largest company, HSBC Holdings PLC (LSE:HSBA), which is down more than 7% after reporting an 80% plunge in profits for the past quarter.
Full-year revenues and profits jumped thanks to rising interest rates, and the board declared a new share buy-back of up to $2 billion, but investors were not impressed.
"Mainland China remains a question mark," said analyst Matt Britzman at Hargreaves Lansdown, with HSBC's write-down of Chinese associate BoCom and the Chinese commercial real estate sector continuing to be weak.
The outlook is "messy", he said, with returns expected in the mid-teens once some one-off bits are taken out, costs are forecast to rise 5% and loan loss levels are expected to tick higher.
"Overall, that paints a mixed underlying picture that looks to be a little worse than the current consensus has built in."
Glencore PLC (LSE:GLEN) is another blue-chip faller, down 4.3% as its underlying profits halved, with no new buyback nor special dividend as the commodities giant works on the acquisition of Teck Resources' metallurgical coal business.
BAE Systems PLC (LSE:BA.) is also in the red, despite beating guidance for profits and unveiling an 11% dividend increase.
Shares in the defence colossus have more than doubled since the outbreak of that war in 2022, so it could be a case of profit-taking and overly high expectations.
The early leaderboard is topped by Barclays PLC (LSE:BARC), rebounding 2% after a large fall on yesterday's results.
St James's Place PLC (LSE:STJ), up 1.8% ahead of results next week, and Burberry Group PLC (LSE:BRBY), up 1.5% after reactions to yesterday's fashion show were further mulled.
7.58am: UK public sector borrowing
January’s public finances figures have delivered some good news for Chancellor Jeremy Hunt ahead of the Budget in two weeks' time.
UK public sector borrowing showed a record surplus of £16.7 billion for January, data from the Office for National Statistics revealed this morning.
This surplus was more than double the surplus of January 2023 and the largest surplus since monthly records began in 1993 in nominal terms.
Borrowing in the financial year-to-January 2024 was £96.6 billion, £3.1 billion less than in the same ten-month period a year ago and £9.2 billion less than the £105.8 billion forecast by the Office for Budget Responsibility (OBR) in November 2023, thanks in part to a fall in interest payable on central government debt.
"We doubt this will pave the way for a big pre-election splash," said economist Ruth Gregory at Capital Economics. "We think the Chancellor will be handed 'headroom' of just £15bn (0.5% of GDP), limiting his ability to unveil big unfunded tax cuts if he wishes to adhere to the fiscal rules."
7.51am: FTSE now heading lower
Strike that, reverse it - the FTSE is now expected to start by edging lower for a second day, with spread-betting platforms indicating a 4-point decline.
HSBC, the third largest constituent of the index, will be a major weight following the profit plunge it reported.
Some upward propulsion should be provided by BAE Systems PLC (LSE:BA.), which beat its own sales and profit guidance for the past year and said it expects growth to accelerate this year.
Sales from the defence contractor came in at £25.3 billion, up 9% on the previous year and ahead of its guidance of £23.3 billion, while underlying EBIT also rose 9%, to £2.7 billion.
The board recommended a final dividend of 18.5p, bringing the total dividend in respect of 2023 to 30p, an 11% increase on the year before.
Guidance for 2024 has growth in sales and profits both improving further, boosted by a record order intake last year.
7.16am: FTSE 100 set for rebound
The FTSE 100 is set to start slightly higher on Wednesday morning, having ended a four-day winning run yesterday.
London's blue-chip index is trading just over three points higher on spread-betting platforms, a day after closing 9.29 points lower at 7719.21.
Results from HSBC will direct some of the market sentiment this morning, with shares in Europe's biggest bank down 3% in Hong Kong after results were released earlier, showing fourth-quarter profits falling just over 80% to $1 billion.
This largely reflected a $3 billion impairment charge relating to an investment in associate Chinese bank BoCom, the sale of retail banking operations in France and a further writedown on commercial real estate.
On the plus side for investors, the board approved a fourth interim dividend of $0.31 per share, resulting in a total for 2023 of $0.61 per share, and promised a share buyback of up to $2 billion.
Profits for the year rose almost 80% to $30.3 billion, which chief executive Noel Quinn noted was a record performance, which he said "enabled us to reward our shareholders with our highest full-year dividend since 2008, three share buy-backs last year totalling $7bn, and a further share buy-back of up to $2bn. This reflected four years of hard work and the strength of our balance sheet in a higher interest rate environment."