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CFDs are complex instruments. 72% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

Early Morning Call: FTSE 100 remains near all-time high amid contrasting earnings reports

BHP Group posted a larger-than-expected fall in first-half profit while HSBC posted a 92% increase in quarterly profit, beating estimates.

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Equity market overview

APAC equity markets closed marginally down, following a European session that saw little variations. This was due to a lack of direction from the US where markets were closed to celebrate George Washington’s birthday.

In Australia, minutes of the Reserve Bank of Australia (RBA) meeting on 7 February show that it abandoned all thought of pausing its tightening policy and signalled more rate hikes would be needed in the months ahead. There were only two options for the board members: a 25 or 50-basis point (bp) hike. Eventually, it settled on a quarter point rise, which brought the cash rate to a fresh decade-high of 3.35%.

Since last May RBA rates have risen by 325 basis points. "The recent inflation data suggested more breadth and persistence in inflation than had been expected and that strong demand was leading to price increases in some parts of the economy," the minutes said. "While inflation was expected to decline, there was a risk that it could persist at an uncomfortably high level, which would entail longer-term costs." Inflation is currently running at a 32-year high of 7.8% and is only expected to slow to the top of the RBA's target range of 2-3% by mid-2025. As for the market, it expects a peak for interest rates to 4.2%, compared with 3.6% back in January.

In Europe, the market awaits S&P Global PMI manufacturing and services PMI for February, and Germany ZEW economic sentiment. The index is expected to rise for a fifth straight month to 22 in February, from 19.6 in January. Last month the index jumped by about 40 points to end a 10-month period below 0, which means that a majority of economists and analysts are optimistic for the German economy.

Macroeconomics

On the other side of the Atlantic, a couple of macroeconomic indicators could move the Canadian dollar later today. At 1.30pm, Canada's consumer price index (CPI) is forecast to fall to 6,1% in January year-on-year (YoY), continuing to cool from the beginning 8.1% peak reached in June 2022.

Also at 1.30pm, retail sales are expected to rise by 0.5% in December month-on-month (MoM).

And in the US at 3pm, existing home sales are expected to rise by 2% in January YoY, ending 11 months of decline.

Corporate news

Elsewhere on the corporate front, BHP Group posted a larger-than-expected fall in first-half (H1) profit. Underlying profit from continuing operations fell 32% to $6.6 billion, missing estimates of $6.82bn. The group proposes an interim dividend of 90 cents per share, down 40% compared to last year.

BHP said it logged a $1bn inflation hit, primarily from diesel costs, for the half, and added that the lag effect of inflation and continued labour market tightness will impact its cost base into the 2024 financial year.

One bright spot though was China, which appears to be a "source of stability" for the commodity demand. According to BHP CEO Mike Henry, "There's a lot there that is giving us confidence that we will see an acceleration in the Chinese domestic economy."

Another miner, Antofagasta reported a 39% fall in full-year profit to, as high input costs and a drought in Chile hit its copper production. EBITDA was $2.9 billion, compared with $4.84 billion the previous year.

HSBC posted a 92% increase in quarterly profit, beating estimates. Pretax earnings rose to $5.2bn for the fourth quarter (Q4), up from $2.7bn a year earlier and ahead of the $4.96bn average estimate of analysts compiled by the bank.

Despite the fourth quarter increase, annual profit fell to $17.5bn from $18.9bn in 2021, due to an impairment of $2.4 billion related to the sale of its retail banking operations in France. Annual credit losses rose to $3.6bn, more than the $3.2bn expected. The bank intends to pay a special dividend of $0.21 per share, as a priority use of the proceeds from the $10 billion sale of its Canada business.

InterContinental Hotels Group posted higher full-year profit, helped by strong occupancy demand during the holidays and higher room prices. Operating profit rose 55% to $828 million. The group plans to buy back shares to return an additional $750 million in 2023.

In the US, Walmart is scheduled to post its Q4 earnings before the market open. The market expects earnings of $1.52 per share on revenue close to $160bn. Over the past 12 months, Walmart has seen its share price increase by just over 8%, but the period has been quite a ride for the retailer.

Another all-session stock due to report before the opening bell is Home Depot. The group is expected to post earnings of $3.28 per share on revenue close to £36bn, down some of 7% YoY.

Alibaba is expected to report earnings later this morning. The Chinese e-commerce legacy business is facing real challenges to revive its growth despite China's reopening and the abating regulatory fears.

The consensus EPS forecast for the quarter is $1.89, higher than the $1.5 reported in the previous quarter but remains 14% lower than the same quarter in 2021. The group's revenue is anticipated to shrink 6% year-over-year to $35.85 billion.

Tonight, after the US closing bell, analysts anticipate Coinbase Global to post a loss if ¢2.51 per share on revenue of $588m.


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