Daily market update: BAE Systems, Glencore, HSBC, Jet2

“The FTSE 100 dipped at the open on Wednesday, dragged lower by weakness among housebuilders and as commodities giant Glencore fell on poorly received results,” says AJ Bell Head of Investment Analysis Laith Khalaf.

“Higher-than-expected UK inflation was seen as reducing the chances of interest rate cuts from the Bank of England, which is bad news for a housebuilding sector reliant for demand on mortgage availability and affordability.

“Overnight US stocks enjoyed a choppy if ultimately positive session with the S&P 500 hitting a fresh record high while Asian stocks fell as the Trump administration signalled plans for 25% tariffs on automotive imports and additional levies on drugs and semiconductors.”

BAE Systems

“The recent momentum in BAE Systems came to a halt on the company’s full-year results. BAE, like other European defence names, has been in demand with investors as the US recently signalled the continent would need to take more responsibility for its own security.

“With the shares trading at record highs going into these numbers, and having more than doubled since Russia’s invasion of Ukraine in 2022, a high bar was set. The fact BAE merely hit the top end of expectations rather than outright beating them and delivered fairly cautious guidance seems to have been enough to spark a round of mild profit taking.

“Longer-term, BAE will be encouraged by the direction of travel, with European countries likely to look not only to boost their military expenditure, but also production capabilities on this side of the Atlantic to reduce the reliance on US imports.

“Given BAE’s size and its focus on long-term contracts and spending programmes, it may take some time for evidence of this shift to show up in the company’s order book.”

Glencore

“Glencore’s controversial decision to retain its coal assets last year has had a negative impact in the short term as weaker prices helped put pressure on full-year earnings.

“Given sticking with coal raised eyebrows among some market observers, Glencore could really do with this looking like a smart business decision sooner rather than later.

“Alongside the results, comments from CEO Gary Nagle suggested the UK market could face a fresh blow to its prestige as he suggested the company might look to shift its primary listing to get a better valuation.

“The unveiling of a new share buyback is also an attempt to boost the stock, although not one which has immediately carried much weight with investors.

“The fact the company’s profitability is dictated by volatile commodity prices, over which it has no control, is always likely to be an obstacle to a really premium valuation.”

HSBC

“Given its size, HSBC is often compared to a supertanker in the sense it is not that easy to change course. However, CEO Georges Elhedery has belied this logic since taking over last September, announcing a major restructuring of its operations and unveiling further cost cuts alongside today’s results.

“As well as scaling back costs, the company plans to redeploy capital to the parts of its business where it really excels rather than just making up the numbers.

“An easing net interest margin shows the positive impact from higher rates is beginning to ease for HSBC and the rest of the banking industry.

“Investors will be keeping a close eye on losses related to the Chinese and Hong Kong property market given impairments here have started to tick higher.

“However, the announcement of a share buyback and a further hike in the dividend offer evidence of management’s confidence in the outlook.”

Jet2

“Travel stocks have enjoyed a real time in the sun over recent years but there is recent evidence that the good times might be on their way out – with Jet2 the latest name to disappoint the market.

“While the company boosted profit guidance for the 12 months to the end of March, the shares were in a tailspin as investors turned their attention to warnings of cost pressures in the year ahead.

“The company says it sees the risk of pressure on margins as households’ ability to spend whatever it takes for a week in the sun begins to ebb away. Add in delayed delivery of new planes and the impact of Budget changes and it’s no surprise Jet2 is feeling gloomier.”

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