FTSE 100 ticks higher ahead of UK Budget and Magnificent Seven results, BP falls despite beat and buyback as debt creeps up and HSBC shines after announcing big restructuring plan

“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,” says 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.

“There was some good news ahead of the Budget as prices in the shops fell by their sharpest rate since August 2021, reducing some pressure on household finances.”

BP

“Today’s quarterly earnings will have done little to alleviate the pressure on CEO Murray Auchincloss. Yes, the results were marginally better than downbeat expectations after a gloomy teaser from the company last week, but this was still the worst three months the company has endured since the pandemic.

“Of all the major oil companies BP perhaps went heaviest on the energy transition under Auchincloss’ predecessor Bernard Looney. And while today’s announcement doesn’t explicitly confirm reports the company is abandoning targets to scale back its oil and gas production by 2030, the direction of travel seems pretty clear.

“The company has fallen behind its US peers who have taken a more pragmatic approach, with no plans to move out of hydrocarbons, no interest in renewables and a focus instead on what they see as complimentary areas like carbon capture and hydrogen.

“BP has also been left behind by its close UK counterpart Shell, which has built a long-term strategy around natural gas – which is seen in some quarters as a bridge between more polluting fossil fuels like coal and oil and renewable energy.

“While better than nothing, buybacks on their own clearly won’t be enough to win the market over, particularly against a backdrop of lower profit and cash flow and mounting debt. Ultimately, BP has lots of work to do to convince investors it has a clear strategy for the future.”

HSBC

“The big shake-up of HSBC looks to be taking place from a position of some strength based on the company’s latest quarterly numbers which came in notably better than anticipated. New CEO Georges Elhedery has wasted absolutely no time since taking the top job in September, already announcing plans to split HSBC geographically into eastern- and western-facing businesses.

“This reflects the difficult challenge HSBC faces of capitalising on the growth potential in Asian markets at a time of mounting geopolitical tensions between East and West.

“Elhedery has denied this will lead to a break-up of the business and suggested it is about simplification rather than any response to the current geopolitics, but that will do little to dampen speculation. Further information on the restructuring is promised in February and Elhedery can expect more questioning on these points then, particularly if the politics has moved on in the interim.

“HSBC’s beat was largely driven by lower costs and a strong showing from its wealth management division. Net interest income, the difference between the revenue generated by interest-bearing assets and the cost of servicing liabilities, actually came in below expectations but the combination of a new boss who seems to be grasping the nettle and a fresh share buyback has helped the numbers get a favourable hearing from the market.”

These articles are for information purposes only and are not a personal recommendation or advice.