European markets have started in negative territory for a third day running on Wednesday. In a change of pace from the last 48 hours, banks shares are not leading the price decline, though energy shares remain weak with oil prices below their 200-day moving average.
Well-received corporate results from HSBC (LON:HSBA) and Next (LON:NXT) have limited the downside for the FTSE 100, which was flat by mid-morning. Mining stocks were mixed after Rio Tinto (LON:RIO) reported its quarterly earnings whilst utilities including Centrica (LON:CNA) and SSE (LON:SSE) were lower following a report from regulator Ofgem.
The announcement of a share-buyback from HSBC has calmed nerves and helped bank shares recover after a dramatic two-day sell-off. Banks are not out of the woods yet. There are only so many days on the trot that the shares of some of Europe’s biggest banks can strike new record lows. The two-ended squeeze of low profits in a low interest rate environment and regulatory pressure to build up capital reserves means capital raising is a case of when not if.
Shares of HSBC gained over 3% despite a 29% drop in quarterly profits after the bank announced a share buyback worth $2.5bn, using proceeds from the sale of its Brazil business.
The British pound was mostly unmoved by data showing no change from an initial reading on the service sector. The July UK services PMI matched the flash estimate of 47.4, down from 52.3 in June and its lowest level since March 2009. The survey data since Brexit has unabashedly bad, perhaps barring the consumer, the question is whether survey data alone justifies a dramatic change in policy from the Bank of England.
US stocks look set for a lower open ahead of earnings from Time Warner (NYSE:TWX), Twenty-First Century Fox (NASDAQ:FOX) and Tesla (NASDAQ:TSLA) as well as ADP unemployment and ISM non-manufacturing PMI data.
USA pre-opening levels
S&P 500: 4 points lower at 2,153
Dow Jones: 26 points lower at 18,287
Nasdaq 100: 10 points lower at 4,709
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