The FTSE 100 was helped higher by strong results released by HSBC on Tuesday as investors geared up for tomorrow’s budget and the announcement of a raft of measures that could have significant implications for the UK economy and stock market.
London’s flagship index carved a gain in early trade, with China-focused stocks piggybacking on HSBC’s upbeat results and investors preparing for US earnings from major technology companies.
“The FTSE 100 ticked higher on Tuesday, helped by some positive corporate results as investors await earnings updates from the US tech sector and tomorrow’s Budget,” said AJ Bell head of financial analysis Danni Hewson.
“A huge chunk of the S&P 500 are reporting this week including five of the Magnificent Seven, so investors will get an excellent sense of the overall shape of the US third-quarter earnings season over the next few days. Although any market focus on earnings will rapidly be diverted to next week’s presidential election and Federal Reserve meeting.
“In London, positive numbers from HSBC helped lift other Asia-focused financials like Standard Chartered and Prudential.”
Despite starting the session on the front foot, the FTSE 100’s gains ebbed as the session progressed and was trading almost flat at the time of writing.
A 2% drop in BP shares offset strength elsewhere after the oil major revealed its worst quarterly earnings report in nearly four years.
“Refining margins continue to be a thorn in bp’s side, being the key driver in the $1bn fall in third-quarter underlying replacement cost profit,” said Derren Nathan, head of equity research, Hargreaves Lansdown.
“The knock-on effect on cash flow, as well as increasing investment spend, saw net debt tick up to $24.3bn. However, bp is holding its nerve, upping the dividend from 7.27c to 8.0c and releasing another $1.75bn to buy more of its own shares, which are down 24% over the last six months.”
Budget
Investors will be all too aware of tomorrow’s budget and the implications for UK equities. Given the potential risks to the UK stock market, UK shares are relatively muted. There is an argument traders have already priced in any potential measures given the newsflow around the budget and predictions of tax changes for investors and businesses.
“Retail investors are bracing themselves ahead of what is widely expected to be one of the most significant Budget days of recent years. Rachel Reeves has had only a few months to determine the magnitude of the UK’s fiscal challenges, let alone work out the measures needed to correct the course and enable the new Government to start to execute its plans,” said Steve Clayton, head of equity funds, Hargreaves Lansdown.
“Changes to pensions, capital gains tax, inheritance tax and employers NI have all been mooted in the press. Tomorrow we find out the reality of it all. The headline numbers look likely to be big, with estimates of the sums needing to be raised having risen to as much as £40bn.”