Investors Merge On HSBC Decision…

Monday, 15 February: The FTSE indices were in the green today as the Nikkei  225 surged 7% overnight on increased hopes of government and Central Bank stimulus in Japan, and further stimulus in China given poor trade data. The broad based rally in London put banks among others up in the green, while a handful of precious metals miners traded lower.

The announcement that HSBC would remain UK-domiciled hit the news tickers yesterday, but markets had to wait until today to react to the news. This saw the shares gain over 1.3% in London and commentators applauding/criticising the decision in equal measure. Some saw potential benefits from the Group remaining in London, pointing to better M&A opportunities, and the ease with which cross-border transactions are conducted in London.

Recent Chinese figures illustrated worsening terms of trade, but global equity markets were relatively sedate on the news. Exports fell 11.2% from a year earlier (US$ terms), compared with a 1.4% drop in December. Imports in January were well below the median forecast of a 2.4% decrease, as this came in as an 18.8% fall, from a year earlier, compared with a 7.6% drop in December.

IAG traded 3.2% higher on the back of ratings upgrades last week, and the expectation of strong results that will be filed on February 26th. Investors are cognisant of tragic events in France, Egypt and Tunisia, but excited by IAG’s joint venture with LATAM airlines.

Virgin Money, one of the upcoming ‘challenger’ banks was up almost 6% at the time of writing. This was on the back of a favourable rating from Nomura. Nomura sees headwinds to the banking sector as being notable, but points out investors’ concerns are overdone. Nomura cites China-exposed Standard Chartered as its least preferred bank, but initiated Virgin Money with a buy rating, as it foresees high single digit volume growth.

At the close European indices were up with the FTSE 100 +2.04%, the CAC 40 +3.00%, and the DAX 30 +2.67%.