The FTSE 100 surged higher on Wednesday as heavyweight HSBC and mining gave investors something to shout about. HSBC earnings significantly beat expectations, and miners jumped on the tailcoats of a commodities rally.
Today’s rally takes the FTSE 100 within touching distance of the all-time record high of 8,445 set in May this year.
While US technology shares have been under the spotlight after a rip-roaring rally left the sector with frothy valuations, the FTSE 100’s more defensive sectors have quietly held their own, giving cyclical mining and banking sectors the opportunity to rocket higher on Wednesday and take London’s leading index 8% higher year-to-date.
“Commodities came to the rescue, driving strong gains for the FTSE 100 and helping the UK stock market to buck the sell-off that gripped Wall Street yesterday,” said Russ Mould, investment director at AJ Bell.
“A 1.2% gain from the FTSE 100 was driven by Shell, BP and Glencore following a bounce in the oil price. Brent Crude jumped 2% to $79.61 per barrel, rebounding after declining for five days straight.
“The index was also propelled by a positive reaction to HSBC’s latest share buyback news and a bounce-back from Diageo after yesterday’s troublesome financial results.”
HSBC added the most points to the FTSE 100’s gain on Wednesday after a massive profit and bumper share buyback beat fired-up investor demand for the global bank.
“HSBC delivers a massive profit beat as Noel Quinn says goodbye. The beat was split evenly across strength in underlying profitability and lower impairments. Borrowers are clinging on, even improving in some places, despite interest rates that many haven’t had to handle for quite some year, or ever in the case of younger borrowers. The outlook on loan losses is decent too, with management signalling the worst of the Chinese commercial real estate drama now in the rear-view mirror” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
“A greater focus on Wealth Management is bearing fruit and should allow HSBC to take advantage of the burgeoning middle class in regions like China. There’s also the added bonus of diversification away from interest rates, a key strategic priority over the past few years. With rate cuts expected around the globe, these actions should give Georges Elhedery a strong foundation to work from when he steps up to the CEO seat in September.”
GSK
Long a disappointing investment for shareholders, GSK has shown signs of life in recent quarters. A 13% increase in underlying revenue in Q2 and increased guidance threatened to signal momentum for the pharmaceutical giant on Wednesday. However, investors were unimpressed with the better-than-expected results, and GSK shares were down 2% at the time of writing.
Taylor Wimpey
Taylor Wimpey was also among the better performers on Wednesday after revenue and completions fell less than expected in the first half of the year.
“Despite interest and mortgage rates remaining high, Taylor Wimpey’s had a solid first half. Operating profit landed 12% ahead of market forecasts, although this figure benefitted from increased land sales versus the prior year,” expalined Aarin Chiekrie, equity analyst, Hargreaves Lansdown
“The net private sales rate moved slightly higher too, indicating a small improvement in consumer confidence and their ability to commit to big purchases. 4,728 new homes were completed in the period, with the full-year total now expected to come in at the top end of the group’s prior 9,500-10,000 range. That’s given management the confidence to issue full-year operating profit guidance, which is now expected to be in line with current market expectations of around £416mn, or only a decline of around 10% year-over-year.”
Taylor Wimpey shares were 1.2% higher at the time of writing.