It’s been a soft start to the new week for the FTSE and the pound with both trading in the red. Miners continue to be one of the biggest laggards on the blue-chip index with ongoing concerns surrounding the economic strength of China and a firm US dollar weighing on their performance. The appreciation in the buck can also be seen against sterling, with the GBP/USD rate dipping back below the 1.30 handle and making a fresh 11-month low.
UK odds-on to crash out of EU without a trade deal
It’s not just against the greenback where the pound is coming under pressure, with sterling sliding against all its major peers as the post-BoE selling and Brexit concerns continue to apply downside pressure. A failure to rise on a more hawkish than expected hike from the BoE last week, proved to be a sign of things to come with the pound falling back after the initial knee-jerk reaction higher. On the Brexit front, comments from Liam Fox have done little to aid the pound’s plight, with the UK trade secretary claiming that it is now more likely than not that the country leaves the EU without a trade deal. Dr. Fox gave a 60-40 percent chance of a no deal during a recent interview and while it seems to serve no one's best interests, this game of brinksmanship looks set to continue for the foreseeable future.
HSBC cautious despite posting rise in profit
Europe’s largest bank, HSBC, have struck a cautious tone in their latest trading update despite announcing a 4.6% increase in pre-tax profit for the first half of 2018 to $10.2B. The market reaction has been measured to the news, with the share price falling by around 0.5% in early trade. One of the main reasons for this muted reaction is a significant rise in cost growth, which increased by 7% and while this may reap rewards in the longer-run it will clearly adversely impact profitability in the near-term. CEO, John Flint, said that HSBC would invest between $15-17B over the next 3 years in areas such as technology and China, and this along with a mention of “rising concerns around the future of international trade and protectionism” has taken the shine off what was otherwise a solid set of figures.