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LONDON MARKET EARLY CALL: Stocks Seen Higher; HSBC Profit Plunges

Mon, 3rd Aug 2020 07:01

(Alliance News) - Stock prices in London are seen opening slightly higher on Monday after China's July manufacturing activity came in above expectations, though gains look to be tempered after HSBC's earnings missed estimates.

IG futures indicate the FTSE 100 index is to open 15.24 points higher at 5,913.00. The blue-chip index closed down 92.23 points, or 1.5% at 5,897.76 Friday.

The Japanese Nikkei 225 index is up 2.1%. In China, the Shanghai Composite is up 1.4%, while the Hang Seng index in Hong Kong is flat.

Factory activity in China edged upwards in July as the country's manufacturing sector gathered pace after a sharp coronavirus hit and demand gradually rebounded, according to official data published Friday.

China's purchasing managers' index, a key gauge of manufacturing activity, has bounced back after measures to curb the coronavirus caused a dramatic plunge starting in February and performed better than expected over the past month.

The PMI of the world's second-largest economy came in at 51.1 points in July, up from 50.9 the month before. Any figure above the 50-point mark represents growth rather than contraction.

"The stronger-than-expected China Caixin PMI has helped settle the market today with equities stabilizing, as iron ore rallied. The rally in iron ore is having a predictably positive knock-on effect in oil markets, which sees prices bouncing off session lows," said AxiCorp's Stephen Innes.

Elsewhere, Japan's economy contracted at an annualised rate of 2.2% in the first quarter, unchanged from a second preliminary reading, with corporate capital spending worse than initially estimated, the government said on Monday.

The revised gross domestic product reading in the January-to-March period was in almost in line with the 2.0% decline predicted by analysts surveyed by the Nikkei business daily and followed a 7.2% contraction in the last quarter of 2019.

Two straight quarters of negative growth means that Japan has entered a recession due to the coronavirus pandemic.

However, a July PMI reading made for better reading for Japan. Output and incoming new work both fell at much slower rates in July across the Japanese manufacturing sector than what was seen throughout the second quarter of the year, figures showed on Monday.

The headline au Jibun Bank Japan manufacturing PMI came in at 45.2 in July. This was up from 40.1 in June and the highest score since February. The latest reading remained below the neutral 50.0 value but was well above the 11-year low of 38.4 seen in April.

Already out, HSBC Holdings on Monday posted a first-half earnings slump and said its expected credit loss for 2020 could reach USD13 billion.

In the six months to June 30, revenue fell 8.8% year-on-year to USD26.75 billion from USD29.37 billion, the lender said. Pretax profit dropped 65% to USD4.32 billion from USD12.41 billion a year ago. The profit figure missed the consensus estimate of USD5.69 billion that HSBC had compiled from analysts.

During the half, HSBC booked USD6.86 billion in expected credit losses and other impairment charges, up sharply from USD1.14 billion a year ago.

The stock is down 4.7% in Hong Kong.

The pound was quoted at USD1.3087 early Monday, down from USD1.3125 at the London equities close Friday.

The euro was priced at USD1.1770, down from USD1.1820. Against the yen, the dollar was trading at JPY105.85, up from JPY105.77 in London.

Brent oil was quoted at USD43.35 a barrel Monday morning, up from USD42.94 late Friday. Gold was trading at USD1,975.20 an ounce, flat from USD1,973.70 at the London equities close Friday.

In the US on Friday, Wall Street ended higher, with the Dow Jones Industrial Average up 0.4%, S&P 500 up 0.8% and Nasdaq Composite up 1.5%.

The economic events calendar on Monday has manufacturing PMI readings from France, Germany, the eurozone and the UK at 0850 BST, 0855 BST, 0900 BST and 0930 BST respectively.

In the economic calendar this week, there is an interest rate decision from the Bank of England on Thursday.

The UK corporate calendar on Monday has interim results from engineering solutions provider Senior and insurer Hiscox. There are annual results from online estate agent Purplebricks Group.

Earnings season in the UK continues apace this week, with interim results from oil major BP on Tuesday, insurer Legal & General on Wednesday, broadcaster ITV on Thursday and drugmaker Hikma Pharmaceuticals on Friday.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

Copyright 2020 Alliance News Limited. All Rights Reserved.

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