HSBC losses top banking sector
Each passing day sees equity markets suffer further losses, as investors struggle to find reasons to remain within the asset class. It looks as if the rout in developed equities is spreading to emerging markets, with concerns about slowing growth combining with a rising dollar. And it wouldn’t be a complete day in global markets these days without some Greece news; officials at the European Commission have run their red pen over Athens’ latest homework and given it an ‘F’. Both sides have merely taken to reiterating their positions and then digging in further.
The damage being wrought to the eurozone economy with all this uncertainty is exemplified by eurozone indices like Germany’s DAX, where we daily witness the erosion of gains engendered by Mario Draghi’s quantitative easing programme. Confidence is being sapped, imperilling the fragile recovery in the region.
In London HSBC shares have been the standout loser in banking stocks today – the bank has a major uphill task ahead of it, as it looks to match the return on equity figures being generated by global rivals. Nonetheless, investors for the moment are grateful that Stuart Gulliver has the steely will to make tough decisions, even if HSBC has its work cut out for it in its attempt to carve out greater market share in the Far East.
US markets off early-morning lows
US indices have clambered off the lows set by futures this morning, but this still looks like a short-term bounce that will get smacked back down in due course. A rise in job openings last month to a fourteen-year high confirmed the more optimistic picture painted by last week’s non-farm payrolls, and as a result equities continue to reflect the idea that a Fed hike is earlier than thought.
Jobs are not the full story of course, but the natural read across is that wages will be on the rise as more employers compete for staff, pushing up retail sales and generally lifting the economy from the doldrums of the first quarter. We can expect more losses on indices, as the risk-reward element continues to work against the equity market.
Shale forecast lifts oil prices
Oil prices have been heavily bid in the session, thanks to some fancy forecasting that points towards a drop in production in US shale output next month. This seems like a case of ‘jam tomorrow’ for crude buyers, but it has been enough to prompt the biggest one-day rise in oil for the month so far. However, this also looks like a bit of rapid short-covering, and should production rebound in August, we can expect the downward progression in crude to resume.
Pound's struggles continue
Cable spent the day recovering from a weak morning session. Although trade data was a touch better, it still look time for the news to be fully reflected, and GBP/USD is still stuck below the $1.54 level that has held it back in recent sessions. With EU referendum news in the headlines the pound is still going to struggle, since it advertises to all concerned the fundamental uncertainty hanging over the UK.
The ongoing Greek drama continues to be good for the euro however, which, although coming off from yesterday’s highs, continues to regard a possible Grexit as a positive, since it strengthens the unity of the remaining euro bloc.