Investors Bank on HSBC

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Friday, May 3: US markets closed lower on Thursday as the Fed confirmed the market’s suspicions that it would leave rates unchanged, following on from Jerome Powell’s comments on Wednesday. Asian markets were mixed in early trade with many markets closed, though European markets were higher at the open.

HSBC was 2% higher at the start of trading after Q1 net profit increased 33.7%, leading the FTSE 100(+0.40%) alongside retail and mining stocks. The bank exceeded expectations with stronger than expected Q1 growth at both top and bottom lines, as the bank’s expense growth slowed amid divestitures. Performance was lifted by strong revenue growth in HSBC’s Retail Banking & Wealth Management and Commercial Banking divisions. The net interest margin came in 7 basis points lower to 1.59%, though return on tangible equity was 220 points higher at 10.6%. Miners received some share price support intraday from Tesla as the EV manufacturer announced it expects global shortages of nickel and copper alongside other minerals. Electric cars use twice as much copper as internal combustion engines, while smart home systems such as Amazon’s Alexa are slated to consume 1.5bn tonnes of copper by 2030.

According to PMI data for April, Britain’s service sector managed to eke out a small gain at 50.4, from 48.9 in March. This was slightly below economists expectations of 50.5, indicating a fall in business activity for the fourth consecutive month, while employment numbers remained largely unchanged. Higher wage costs & weaker sales had led to cautious staffing policies. Sage words were communicated in the Bank of England inflation report yesterday, “the relationship between survey responses and GDP growth may be weaker at times of high uncertainty”, suggesting survey data is prone to sentiment swings and that the Bank of England is looking through transient factors which impact economic data.

European equities closed higher today, with the FTSE 100 +0.40%, the CAC 40 +0.18% and the DAX 30 +0.55%.

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