HSBC Holdings Share News (HSBA)

LONDON (Alliance News) - Losses from the heavyweight mining and banking sectors kept the FTSE 100 in the red, with the former falling after weak manufacturing data overnight from China.

The latest survey from Caixin revealed that activity in China's vast manufacturing sector unexpectedly declined further in April despite government stimulus. The manufacturing purchasing managers' index fell to 49.4 in April, from 49.7 in March, and missing expectations of a slight increase to 49.8.

It also moved further beneath the 50.0 mark which separates expansion from contraction.

Royal Bank of Scotland Economics noted the reading hasn't been above 50.0 since February last year and paints a bleak picture of the Chinese economy.

"The overall message seems to be that it's getting ever harder for China to stimulate growth through the old credit pump-priming means," RBS Economics said.

This subsequently led to heavy falls in London's mining sector, for which China is an important customer. The FTSE 350 Mining sector index was the worst performing sector, down 6.8%. In individual stocks, Anglo American was the worst blue-chip performer, down 13%, Antofagasta fell 7.4%, and Rio Tinto fell 6.7%.

This contributed to the FTSE 100 closing down 0.9%, or 56.30 points, to 6,185.59.

The index was also weighed on by banks, with the FTSE 350 Banks sector index closing down 2.5%.

Royal Bank of Scotland Group ended down 3.3% after UBS downgraded it to Neutral from Buy. The downgrade was because of the likely delay of capital returns due to the difficulties faced by RBS in carving out its UK retail branch network Williams & Glyn.

HSBC Holdings, the biggest bank by market value traded in London, said its first-quarter pretax profit fell by 14%, hurt by tough conditions in the banking sector at the start of 2016.

Pretax profit fell to USD6.11 billion in the three months ended March 31, HSBC said in a statement, from USD7.06 billion the corresponding quarter a year earlier. The quarterly profit marked an improvement on the USD858 million pretax loss in the three months ended December 31.

Loan impairment charges, adjusted for currency translation, jumped to USD1.16 billion from USD469 million. HSBC maintained its first-quarter dividend at USD0.10. Its common equity tier one ratio was unchanged compared to the end of 2015, at 11.9%.

Amid uncertainty due to fears about China's economic slowdown, global growth and low oil prices, "extreme" market volatility in January and February hit HSBC's ability to generate revenue in its markets and wealth management business.

The stock ended the day down 1.7%, wiping out GBP1.48 billion from its market cap.

The FTSE 250 ended down 0.4%, or 71.46 points, at 16,730.09, and the AIM All-Share fell 0.3%, or 1.81 points, to 725.90.

In Europe, the French CAC 40 fell 1.6% and the German DAX 30 ended down 1.9%.

On Wall Street at the London close, the Dow Jones Industrial Average was down 1.1%, the S&P 500 was down 1.2% and the Nasdaq Composite was down 1.3%.

Commodity prices slumped later in the day. At the London stock market close Brent oil traded at USD44.82 a barrel, continuing its falls from Monday when it ended the day at USD45.87 a barrel.

Gold retreated from its intraday high of USD1,301.64 an ounce to trade at USD1,286.52 an ounce at the London equities close.

The commodity price fall came at the same time as some resurgence in the dollar. At the London close Tuesday, the euro traded the dollar at USD1.1511, having hit an earlier high of USD1.1616, its highest level since August 2015.

The pound declined from its highest level against the dollar in four months of USD1.4770, to trade at USD1.4538 at the London close.

The pound was also hit by UK manufacturing PMI, which showed UK factory activity contracted for the first time in three years in April.

The Chartered Institute of Procurement & Supply PMI fell unexpectedly to 49.2 in April from revised 50.7 in March. It was forecast to rise to 51.2 from March's originally estimated value of 51. The reading fell below the critical 50.0 mark for the first time since March 2013.

The headline index was dragged lower by lacklustre trends in UK production and new orders and declines in both employment and stocks of purchases.

Nevertheless, Paul Hollingsworth, UK economist at Capital Economics, remained optimistic about the sector's prospects for the rest of the year.

"Looking ahead, the fall in the pound since mid-November should help in time, and we are upbeat about the prospects for the global economy. Accordingly, we continue to think that things will improve for UK manufacturers later this year," Hollingsworth said.

Elsewhere in the FTSE 100, RSA Insurance Group was the top blue-chip performer in London, up 2.8% after the insurer was upgraded to Overweight from Equal-Weight by Barclays.

The bank said RSA has set out its intentions to become the benchmark performer in each of its core markets in the UK, Scandinavia and Canada by 2018.

"While we acknowledge that it is rare for a mid-of-the-pack insurer to become a 'best in class' insurer, we do believe RSA has set out a realistic plan to get there," Barclays said.

In the FTSE 250, shares in Indivior fell 8.4% despite the company reiterating its guidance for the full year, as it reported a drop in pretax profit for the first quarter of 2016.

The company, which focuses on its suboxone film medication for opioid dependence, said its pretax profit for the quarter to the end of March was USD86.0 million, down from USD102.0 million a year earlier. This was predominantly as a result of higher selling distribution and administrative expenses, as well as a step up in research and development costs.

Reporting a second consecutive quarter of slowing net outflows wasn't enough for Aberdeen Asset Management to distract from a set of first-half results demonstrating the pain of fragile investor sentiment towards emerging markets.

Pretax profit fell to GBP98.8 million in the six months ended March 31, Aberdeen said in a statement, from GBP185.4 million in the corresponding half a year earlier.

Aberdeen's interim dividend of 7.5 pence per share was unchanged.

Underlying profit, stated before amortisation of intangible assets and acquisition-related items, fell to GBP162.9 million from GBP270.2 million.

"These results reflect the challenging conditions Aberdeen has faced during the past three years, in particular the weakness in emerging markets," Chief Executive Martin Gilbert said in a statement.

The stock closed down 9.4%, making it one of the worst performers in the FTSE 250.

Just Eat ended as the top mid-cap gainer, up 6.2% after it raised its guidance for full-year revenue and earnings following a successful first quarter, a move which it also made twice in 2015.

The online takeaway delivery company said it achieved 57% growth in orders in the first quarter of 2016 year-on-year to 31.5 million, up 41% on a like-for-like basis. It said each of its segments delivered strong growth, particularly the UK which saw a 40% increase in orders.

As a result of this, Just Eat increased its full-year revenue guidance to GBP358 million from GBP350 million, while raising its underlying earnings before interest, tax, depreciation and amortisation target to between GBP102 million and GBP104 million from between GBP98 million and GBP100 million.

In the economic calendar Wednesday, there are Markit services and composite PMI readings from a number of countries. France is at 0850 BST, Germany at 0855 BST, the eurozone as a whole at 0900 BST, and the US at 1445 BST. UK construction PMI is at 0930 BST and ISM non-manufacturing PMI for the US is at 1500 BST.

There are also eurozone retail sales at 1000 BST, US mortgage applications at 1200 BST, and US ADP unemployment change at 1315 BST. US factory orders are at 1500 BST and the Energy Information Administration's crude oil stocks are at 1530 BST.

It is a busy day in the UK corporate calendar with a number of blue-chip company issuing statements. There are full-year results from supermarket chain J Sainsbury, first quarter results from oil and gas giant Royal Dutch Shell, gold miner Randgold Resources, and fashion retailer Next.

Imperial Brands, formerly Imperial Tobacco, reports interim results and motor and home insurer Direct Line Group and shopping centre owner Intu Properties both release trading statements. Miner and commodities trading house Glencore issues first quarter production results.

Elsewhere, there are trading statements from pub company JD Wetherspoons and home credit lender International Personal Finance.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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