6.50am: Dead cat bounce?
The FTSE 100 index is expected to open slightly higher on Tuesday, edging back above the 5,800 level surrendered on Monday as Asian markets stabilised somewhat and global banking giant HSBC PLC (LON:HSBA) posted a less-than-expected 35% drop in quarterly profit, citing an expected improvement in the economic outlook for its main markets.
The tick up, however, comes in the face of big overnight falls on Wall Street amid fears over a jump in coronavirus (COVID-19) infections and worries over the lack of a US stimulus package as the outcome of next week’s presidential election creates uncertainty.
Spread betting firm CMC Markets expects the blue-chip index to open around 9 points higher at 5,807, having shed 68.27 points on Monday to close at 5,792.01.
Overnight in New York, the Dow Jones Industrials Average dropped 650 points, or 2.3% to end at 27,685, albeit above the session lows, while the broader S&P 500 index fell 1.9%, and the tech-laden Nasdaq Composite lost 1.6%.
Jeffrey Halley, senior market analyst, Asia Pacific, OANDA commented: “The ‘blue wave’ stimulus trade hit a reef overnight, as another night of no progress on US stimulus talks tested the conviction of investors. The effects were most noticeable on US equity markets which finished deeply in the red, sucked out to sea by the receding blue wave.
“The surge in Covid-19 cases around the world, notably Europe, has also sapped confidence, increasing fears of a ‘double-dip’ scenario.”
Asian markets were more mixed Tuesday, with Hong Kong’s Hang Seng index down 0.8%, but Japan’s Nikkei 225 index only slipping by 0.1%.
OANDA’s Halley noted: “Asian markets are benefiting from not buying so enthusiastically into the US stimulus trade as Wall Street. But with Covid-19 crushing European equities, and a re-pricing of risks now occurring in the US, Asia will not be immune. I continue to expect that risk will be taken off the table as the week progresses, meaning that rallies will be short in duration, with risks skewed to the downside.”
HSBC starts corporate news flow
This week’s deluge of corporate updates kicked off with a vengeance on Tuesday, with the numbers from Hong Kong-based global bank HSBC.
Reported pre-tax profit for the Asian-focused lender came in at $3.1bn for the quarter ended September 30, higher than the $2.07bn average of analysts’ forecasts compiled by the bank.
HSBC also said it expected losses from bad loans to be at the lower end of the $8bn to $13bn range it set out earlier this year.
The bank revealed as well that it would embark on a transformation of its business model, seeking to switch its main source of income from interest rates to fee-based businesses and also accelerated plans to shrink in size and slash costs further than previously suggested.
HSBC’s Hong Kong-listed shares rose over 5% in response.
BP and Whitbread due too
BP’s third-quarter results may make grim reading for oil investors.
In a preview, Swiss bank UBS pointed out the obvious, by describing the third quarter as “a difficult period” – with the oilers’ share price down nearly 28% since its prior quarterly results and strategy reboot.
Previously, BP lowered production guidance for the quarter but UBS noted that the company “will be essentially balanced from a cashflow perspective”.
The Premier Inn and Brewers Fayre parent previously reported that sales had slowed by 77% for the half.
On that basis, first-half earnings (EBITDA) will fall to a £285mln loss from a £285mln profit in the same period a year ago, according to forecasts from UBS.
Around the Markets:
- Sterling: US$1.3007, up 0.1%
- Gold: US$1,904.60 an ounce, up 0.1%
- Brent crude: US$40.77 a barrel, up 0.5%
6.45am: Early Markets – Asia/Australia
Stocks in the Asia-Pacific region were mostly lower on Tuesday following an overnight tumble on Wall Street.
Australian shares led losses among the region’s major markets, with the S&P/ASX 200 slipping 1.7%.
In China, the Shanghai composite was flat while Japan’s Nikkei 225 shed 0.04%.
South Korea’s Kospi fell 0.56% even as the country’s real gross domestic product grew 1.9% in the third quarter as compared to the previous quarter.
Proactive Australia news:
Strategic Elements Ltd (ASX:SOR) (ASX:SOR) has almost trebled this morning with subsidiary Australian Advanced Materials (AAM) agreeing to develop a self-charging battery technology in a collaboration with the University of New South Wales (UNSW) and CSIRO.
Whitebark Energy Ltd’s (ASX:WBE) Canadian subsidiary Salt Bush Energy (SBE) has renewed the mineral lease over a 256-hectare section of Wizard Lake Oilfield (WLO), which will result in Whitebark’s average interest in WLO oil and gas rights increasing to 87.5% from 84%.
Marvel Gold Ltd (ASX:MVL) has intersected karst horizons in the majority of holes drilled to date at Lakanfla Gold Project in western Mali at various depths and thickness within the first 60 metres from surface.
Theta Gold Mines Ltd (ASX:TGM) has received an indication of support from South Africa’s Department of Mineral Resources and Energy (DMRE) for its application to amend Mining Right 83 to also permit open pit mining at the Theta Gold Project.
FYI Resources Ltd (ASX:FYI) (FRA:SDL) has completed a detailed high purity alumina (HPA) production trial through the pilot plant in Welshpool, Western Australia, aimed at aligning the company’s product to the specifications required of particular end-users in both the LED and battery directed markets.
Creso Pharma Limited’s (ASX:CPH) (OTCMKTS:COPHF) (FRA:1X8) wholly-owned Canadian subsidiary, Mernova Medicinal Inc, a licensed producer in Nova Scotia, has received and delivered its third purchase order from the Nova Scotia Liquor Corporation (NSLC).
Zelira Therapeutics Ltd’s (ASX:ZLD) (OTCQB: ZLDAF) (FRA:G1G) proprietary cannabinoid medicines, HOPE 1™ and HOPE 2™, are now available by prescription to patients in Australia through the Therapeutic Goods Administration’s (TGA) Special Access Scheme and through authorised prescribers.
Walkabout Resources Ltd (ASX:WKT) spent the September quarter actively engaged in developing the fully permitted, 100%-owned high-grade Lindi Jumbo Graphite Project in South-East Tanzania and has progressed negotiations for debt and equity fundraising to secure the capital required for construction.