FTSE falls as HSBC disappoints

The FTSE 100 is trading lower by around 20 points at the time of writing largely due to a sharp drop in the stock of HSBC. The pound is rising against most of its major peers barring the buck with sterling at its highest level in a week against the Euro.

HSBC drops on earnings miss

Shares in HSBC are trading lower by more than 6% this morning after the bank reported a significantly below forecast pre-tax profit for Q4 2016. With the bank the first of many major lenders to report this week, there was a sense of optimism that the worst was behind them as far as UK banks were concerned after a prolonged troublesome period since the ‘08 financial crisis. However this morning’s release appears to have stopped any early optimism in its tracks and whilst it doesn’t suggest any substantial weakness - despite missing forecasts by 25% pre-tax profit was still $2.6bn - it does perhaps indicate that a prolonged growth recovery for the beleaguered sector is still some time off. Also reporting this morning was Mediclinic with the international private hospital group seeing its stock drop by almost 5% after announcing lower EBITDA margin for the Middle East.

FTSE continues to lag European counterparts

Largely due to the drop seen in HSBC and Mediclinic the FTSE 100 is in the red whilst most of mainland Europe is in the green, with the German Dax closing in on its highest level of 2017. Surveys of purchasing managers showed higher levels of optimism than expected in Germany and the Eurozone with both the manufacturing and services sectors surpassing forecasts. These readings are strong and broadly in the 55 region on the index and, with 50 marking the line between expansion and contraction, suggests a healthy level of optimism on the economy. The biggest riser on the FTSE 100 is Rolls Royce with the manufacturing firm adding to yesterday’s stellar gains on the back of a broker upgrade from Goldman Sachs.

You don’t need to be a weatherman to know which way the wind blows

This morning has seen Bank of England Governor Carney and other members of the MPC testifying on inflation and the current economic outlook before Parliament’s Treasury Committee. Whilst the discussions are still on ongoing there have been several interesting comments so far with Mr. Carney remaining fairly steadfast in his dovish stance. The Governor said that there has been “no uptick in market inflation expectations since November” and that despite short run inflation expectations rising, the medium-term are not and this is “consistent with a temporary inflation overshoot.” These are the most relevant comments so far for the markets although there has been a muted reaction as this is broadly in keeping with comments made at the publication of the inflation report at the beginning of the month. On a side note comments from Andy Haldane, the central bank’s Chief Economist, will likely hit the headlines due to their quoteworthy nature. Mr Haldane admitted to making some “terrible” forecasting errors in light of economic projections post-Brexit but then chose to try and justify this by using a bizarre analogy, stating that there is more limited scope to improve economic forecasting than that of the weather. Indeed, it seems that the Bank may be coming to the realisation that they’ve had their own “Michael Fish moment.”