Profits at HSBC have jumped 28% in the third quarter of 2018 thanks to lower costs and strong revenue growth. Pre-tax profit was higher than analysts’ expectations of $5.6 billion and totalled $5.9 billion (£4.6 billion) over the past three months. “These are encouraging results that demonstrate the revenue potential of HSBC,” said John Flint, who became HSBC’s chief executive last year. “We are doing what we said we would – delivering growth from areas of strength, and investing in the business while keeping a strong grip on costs.” “We remain committed to growing profits, generating value for shareholders and improving the service we offer our customers around the world.” The bank reduced spending from $7.9 billion to $7.7 billion, whilst revenue rose by 6% to $13.8 billion. Shares in HSBC rose over 4% to 631p in early trading in London. Laith Khalaf, a senior analyst at Hargreaves Lansdown, said: “HSBC may be the second biggest company on the UK stock market, but its profits are predominantly emanating from its historic home in the far east. Three-quarters of the bank’s profits so far this year have come from its Asian operations, leaving the European business trailing in its wake.”

“Profit growth has been broad-based across HSBC’s main banking activities, and what’s positive is that’s coming from a rising top line rather than simply cost-cutting, which can only deliver results for so long. Indeed adjusted operating costs have actually ticked up, though that’s to support investment in growth opportunities, notably in the bank’s digital proposition.”

He added: “As an international retail and commercial bank, HSBC is clearly plugged into the global economy, and in particular the fortunes of China and the surrounding area. While in the long term this looks like an ace in the sleeve, investors should expect a bumpy journey, particularly if Trump’s trade war dents growth in the region,” he added.

Shares (LON: HSBA) are currently trading +5.85% at 640,39 (1134GMT).

N4 Pharma (LON:N4P) shares ticked up on Monday after the company announced a positive set of results from its Nuvec research study. The pharmaceutical firm, which specialises in developing vaccines and cancer treatment, conducted research to determine the immune response that Nuvec can produce. According to the statement, the research study revealed that Nuvec(R) particles have a ‘clear adjuvant effect to help deliver a level of immune response for both the mRNA and pDNA OVA antigens comparable to that of existing delivery systems.’ Consequently, this would mean that Nuvec would not require the introduction of an additional adjuvant when formulating a vaccine using the delivery system. N4 Pharma said this would simplify the process and reduce costs relating to the development of the vaccine. In addition, the study revealed that the level of immune response from Nuvec remains within acceptable levels, demonstrating no adverse toxicity effects. Nigel Theobald, CEO of N4 Pharma commented: “These results are another positive step forward for our Nuvec(R) delivery platform. The data validates the potential of Nuvec(R) to act as an alternative delivery system for the development of vaccines and cancer treatments but without the associated unwanted systemic side effects and with no signs of liver toxicity often seen using lipid nanoparticle systems. “Our next research study will focus on demonstrating the ability of Nuvec(R) to deliver an effective level of immunity using OVA, results of which will be available in first half of 2019. “We are pleased with the Nuvec(R) results received to date and will continue to focus on the many opportunities that we believe will exist for Nuvec(R) to be used to develop a range of different vaccines and cancer treatments. We are building a compelling data package to aide our commercial collaboration discussions which we continue to progress.” Shares in N4 Pharma are currently trading +18.37% as the market reacts to the research results. Read more about our N4 Pharma stock analysis from February, here.

Ryanair investors are ramping up the pressure to call the chairman, David Bonderman, to stand down after over 20 years. At the next AGM, the Local Authority Pension Fund Forum (LAPFF) will also call on the airline to find a successor for chief executive Michael O’Leary.

“On the day of Ryanair’s first-half results Mr O’Leary said Mr Bonderman intends to remain in place for one or two more years and that the company would set out succession plans for Mr O’Leary in the next two or three years,” said the LAPFF said in a statement.

“Shareholders have made it clear they expect action quicker than this.”

The LAPFF is an investment group that represents funds that own a combined 1% of Ryanair.

Under the current law in Ireland, investors holding 3% of shares can introduce a resolution. The LAPFF is seeking the support of other large investors.

At the last AGM in September, almost 30% of shareholders voted against Bonderman’s reappointment so the LAPFF will not struggle to find the backing of 3% of investors.

Ryanair issued a statement saying: “Ryanair shareholders recently passed all AGM resolutions by a large majority, including the nomination of directors and chairman. They appreciate how fortunate we are to have an outstanding chairman like David Bonderman [to] guide the board and the airline.”

The budget airline has had a turbulent year after staff from Belgium, Spain, Portugal and the UK carried out a series of strikes in disputes over contract terms.

Ryanair cancelled 190 of its 2,400 scheduled flights on a Friday in September, affecting 30,000 passengers.

The airline said it “sincerely regrets these unnecessary customer disruptions”.

The airline was in the media this past week after a man allegedly racially abused a fellow passenger.

Shares in the group (LON: RYA) have slipped 0.83% (1116GMT).

Monday afternoon will see Philip Hammond’s last budget before the UK leaves the EU. The budget will be delivered at 15:30 GMT and will announce the government’s plans for taxes and how it will spend public money. What can we expect from the annual budget?

NHS

Another £20 billion will be pumped into healthcare. This will include a £2 billion increase in spending for mental health. The current annual mental health spend is about £12 billion. Earlier this month, Theresa May appointed the first ever minister for suicide prevention. Shadow health minister, Barbara Keeley, is sceptical of the promised funding. “If this announcement is simply money that’s already been promised, it will do little to relieve the severe pressures on mental health services that have built up because of this Tory Government’s relentless underfunding of the NHS,” she said. “People with mental health conditions cannot afford to wait five years for meaningful action from this Government: too many are already waiting many months to access the treatment.”

Brexit

An analysis by the Centre for European Reform has found that the UK economy is 2.5% smaller now than if the British public voted to remain within the EU. Speaking to Sky News about a potential no-deal scenario, Hammond said: “We would need to look at a different strategy and frankly we’d need to have a new Budget that set out a different strategy for the future.”

Tech Tax

The Chancellor is expected to announce plans to crack down on the amount of taxes paid by large tech companies including Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN) and Google (NASDAQ: GOOG). In his speech to the Conservative Party conference earlier this month, Hammond suggested a UK digital services tax if an international agreement could not be reached.

After a tweet cost Elon Musk and his company $20 million (£16m) each in fines, the Tesla boss admitted it was “worth it”. The US Securities and Exchange Commission fined Musk and Tesla a total of $40 million after the CEO tweeted he was considering taking the company private at $420 (£327) a share, adding that the “funding secured”. When a Twitter user asked Musk about the ratio of likes was for his “funding secured” tweet, he replied saying “worth it”. As well as the large fine, Tesla also needs to appoint an independent chairman by 13 November. Favourite for the chairman position is James Murdoch, who is currently chief executive of 21st Century Fox, however, will soon leave the role and will be succeeded by his brother. Murdoch is currently a non-executive director of Tesla. “The Tesla chairman job is perfect for James. He’s working on this fund and will be sitting next to Elon … he’s going to get access to so much deal flow,” a person briefed on the discussions told the Financial Times. Tesla reported profits of $312 million over the past three months, beating analyst expectations. Musk told analysts that it was an “incredibly historic quarter”. “Customers actually cared about the future of the company so much that they volunteered their time to help the company succeed. It chokes me up, actually,” he added. Shares jumped 10% in after-hours trading. Shares in the group (NASDAQ: TSLA) are currently trading up 5% at 330,90 (0822GMT).      

Far-right candidate Jair Bolsonaro has won Brazil’s general election. Bolsonaro based his campaign on promises to end corruption, crime and communism and won 55.1% of the votes. Fernando Haddad, who represented the left-wing Workers’ Party won 44.8% of votes. After losing the vote, Haddad told supporters not to lose hope. He said: “We will continue with our heads held high, with determination and with courage, We have a lifelong commitment to this country and we will not allow this country to go backwards.” Brazil has been governed by the left-wing Workers’ Party for 13 years between 2003 and 2016, with the most recent election resulting in a significant swing to the right. Bolsonaro is a former paratrooper has gained to the nickname “Trump of the Tropics” following certain comments on abortion, race, migration and homosexuality. US president’s spokeswoman, Sarah Sanders, said in a statement of the news: “President Trump called President-elect Bolsonaro of Brazil this evening to congratulate him and the Brazilian people on today’s elections. Both expressed a strong commitment to work side by side to improve the lives of the people of the United States and Brazil, and as regional leaders of the Americas.” Like his American counterpart, Bolsonaro has also suggested that Brazil could pull out of the 2015 Paris Agreement on climate change. Amnesty International has said that his presidency is likely to pose a “huge risk” to Brazil’s indigenous peoples, LGBT communities, activists and civil society organisations, black youth and women. The new President has also spoken about his plans to relax gun laws in Brazil. He said earlier this month: “Every honest citizen, man or woman if they want to have a weapon in their homes – depending on certain criteria – should be able to have one.” He will begin leading the country on 1 January 2019.  

The FTSE 100 closed on Friday down 64.54 points at 6,939.56. However, despite the overall fall, the UK blue-chip index did manage to recover from earlier lows of 6,851.59.

Tech Stocks take a hit

Amazon and Alphabet’s worse-than-expected third quarter results have seemed to have affected the whole market, sending both the NYSE and FTSE down. The FTSE 100 was down 116.4 points, or 1.7%, to 6,887.7. Tech stocks affected by Amazon and Alphabet’s fall in share price included Sophos Group PLC (LON:SOPH), which was down 6.9% to 397.8p. Also taking a hit was Avast PLC (LON:AVST), which fell 3.6% to 271.9p.

Rolls-Royce engine troubles send shares down

The aerospace engineer is reportedly facing troubles with the Trent 900 and 1000 lines of engines. This year’s profits are expected to be dented by £450 million, which sent shares down 14% earlier in the afternoon. A statement confirmed the engine issues. “While the production ramp-up issues in Q4 are regrettable, such issues in the early stages of a new engine program are not uncommon in our industry,” it said. “As we move into 2019 we are confident that Trent 7000 production and delivery volumes will increase significantly to meet our customer commitments.” The group remains committed to its full-year guidance.

Friday’s FTSE climbers

Paddy Power Betfair plc (LON:PPB) was the top climber of the day, recovering from losses earlier in the week. Shares were up 2.1% to 6,520p. Another riser was British Airways owner International Consolidated Airlines Group PLC (LON:IAG). The group shares rose 1.8% to 597.8p on Friday thanks to strong profits in the third quarter.    

New figures have shown the US economy to grow at an annualized rate of 3.5% in the third quarter. The US Commerce Department said the US economy grew at a faster-than-expected rate thanks to strong consumer and government spending. The economy grew slower than the 4.2% rate in the second quarter but the latest results were the sixth consecutive quarter with a growth above 2%. Analysts at Wells Fargo wrote: “Growth downshifted a bit in Q3 and we look for some further slowing in the quarters ahead.” “That said, the US economy continues to grow in excess of the rate that most analysts consider to be its long-run potential growth rate.” With rates growing as they are, the US economy is expected to grow at about 3% in 2018. This would be the fastest in a decade. Consumer spending in the third quarter grew at an annual rate of 4%. This is an increase from the 3.8% that recorded in the second quarter. Scott Anderson, the chief economist at the Bank of the West, said: “Four percent growth is a phenomenal performance.” “We don’t think that’s sustainable. We think spending is getting a little ahead of incomes. Some of those interest-rate sensitive spending categories are going to feel more pressure as interest rates continue to rise.” Whilst the US economy is performing well it is not, as Donald Trump has claimed many times, the best it’s ever been. Megan Black, assistant professor of history at the London School of Economics, said: “If you choose to look at the health of the economy based on GDP, Mr Trump’s claims are suspect when compared to the national economic boom of the post-War years.” “The post-War era saw tremendous economic growth, most notably in manufacturing, but also in agriculture, transportation, trade, finance, real estate and mining.”    

Asda will begin a new round of cost-cutting before its proposed merger with rival Sainsbury’s (LON: SBRY), risking 2,500 jobs. The supermarket has been owned by the US retail giant Walmart (NYSE: WMT) since 1999 and is looking to reduce operations across all stores, affecting staff in bakeries, petrol stations and back office roles. Asda said in a statement: “In a competitive retail market, where customers rightly expect great value and ease of service, we must always look at how we can work more quickly and efficiently for them – and inevitably, that means we need to consider changing the roles we need our colleagues to do or the hours needed in particular parts of our stores.” The GMB union, which represents employees working at Asda has said that it will “fight tooth and nail for every single job”. Gary Carter, the national officer of the GMB trade union, said: “These proposed redundancies are a hammer blow to Asda workers. The timing of this announcement, in the run-up to Christmas, is doubly appalling. Asda is performing well and is highly profitable because of the hard work of our members.” “These cuts make no sense whatsoever. Slashing our members’ jobs would hurt the service Asda customers receive. With all the speculation surrounding the proposed Sainsbury’s merger and potential sell-off of stores, this news will not put anyone’s mind at rest.” Last year Asda cut 300 jobs at the head office in a round of cost-cutting. It also cut jobs in 18 underperforming stores, whilst also asking staff in another 59 stores to work more flexibly. Sainsbury’s proposed buyout of its rival is being investigated by the Competition and Markets Authority (CMA). Last month, the CMA said there were 400 stores where the combined group may have to close stores as there was a “realistic prospect of a significant lessening of competition”.