London Report: FTSE dips after HSBC’s profits miss forecasts

BRITAIN’S benchmark equity index fell yesterday, pulled down by HSBC after the heavyweight bank’s interim profits missed forecasts, giving HSBC shares their worst day in well over a year.

The blue-chip FTSE 100 index closed down 0.4 per cent, or 28.29 points, at 6,619.58 points. The decline marked its second consecutive fall after a four-day winning streak last week.

HSBC, which is one of the FTSE’s biggest stocks by market capitalisation, fell 4.4 per cent to take the most points off the index. The stock suffered its worst one-day fall since a

5.8 per cent drop in November 2011.

Brown Shipley fund manager John Smith said that despite signs of a recovery at part-nationalised banks Lloyds and Royal Bank of Scotland, his portfolio was “underweight” in UK bank stocks.

“There’s still too much political interference,” said Smith, referring to plans by the UK government to start to sell its stakes in Lloyds and RBS.

The FTSE 100 raced to a 13-year high of 6,875.62 points in late May before falling back in June, but the index remains up by around 12 per cent since the start of 2013.

Securequity sales trader Jawaid Afsar said the market could still rise back towards those May highs, helped by signs of a recovery in the UK economy, with data yesterday showing a boom in British business in July.

He said expectations that central banks would not abruptly end economic stimulus measures that have driven a global equity rally this year, would further support stock markets.

“If I was pushed, I would say the bias is still to the upside,” said Afsar.

Meanwhile European shares paused near two-month highs, as HSBC’s report revived concerns about earnings from emerging markets. HSBC reported its profits from Latin America more than halved.

The update mirrored weak emerging-market revenues from a number of large European companies, including drinks group Diageo and French drugs company Sanofi last week, as countries such as Brazil struggle with rising borrowing costs and volatile markets.

HSBC’s stock took 1.6 points off the pan-European FTSEurofirst 300 index, which closed up 0.65 points, or 0.05 per cent, at 1,225.39 points after briefly touching a fresh two-month high at 1,231.31 points.

Domestic UK bank Lloyds and French insurer CNP Assurances, which generates more than 80 per cent of its revenue in France, helped to keep the index afloat on expectations for a higher payout.

Lloyds stock rose 2.7 per cent after a Financial Times report saying chief executive Antonio Horta-Osorio had told potential investors he expected to see up to 70 per cent of the bank’s earnings returned to shareholders by 2015.