HSBC and BHP

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“A string of disappointing results from some of London’s largest-listed companies weighs on the FTSE 100 and drags the index down 0.2% to 7,202. HSBC and BHP both fail to impress the market and there is also negative analyst comment on Standard Chartered which depresses its share price. “The next few weeks are very busy in terms of companies issuing financial results or updating on trading, meaning we’re likely to see an increase in market volatility as investors react to the flow of news,” says Russ Mould, Investment Director at AJ Bell.

HSBC

“Today’s figures from HSBC are a bit of a horror show for the banking giant with both revenue and profit coming in short of expectations.

“Over the longer term the company would expect its exposure to China and Asia more widely to be a positive driver of growth given the more rapid economic expansion than seen in the West, and a less mature financial sector.

“In the short term the concerns about a US/China trade war are having an outsized impact on HSBC compared with its rivals.

“The fourth quarter sell-off across the financial markets did the company’s investment banking business no favours, though most of its peers in this space struggled too.

“More importantly the company missed its target of delivering positive ‘jaws’ or growing income faster than operating expenses by the end of 2018.

“There were some other slightly troubling underlying signs with the company’s buffer against financial shocks shrinking modestly and a warning on possible bad debts in the UK.

“The latter will have a negative read-across to other UK banks as HSBC tends to adopt a fairly conservative approach to lending.”

BHP

“Half year results from diversified resources group BHP are a reminder that getting the stuff out of the ground smoothly is equally as important as finding the riches in the first place.

“Its results have missed expectations on multiple metrics after a series of production issues at some of its copper and iron ore mines. Rising costs have also been an issue.

“Higher iron ore prices as a result of Vale cutting production following its Brazilian dam disaster will help BHP’s earnings in the second half of its financial year. However, there is still the big issue of slowing economic growth in China and what that means for commodities demand in general.

“Vale’s dam tragedy has put the spotlight back on the mining industry from both a safety and environmental perspective. Miners must not make any mistakes on the former and the industry will have to raise its standards on the latter.”

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