London pre-open: Stocks seen lower after Apple warning
By Michele Maatouk
Date: Tuesday 18 Feb 2020
(Sharecast News) - London stocks were set to fall at the open on Tuesday, taking their cue from a downbeat session in Asia after tech giant Apple warned on revenues, with all eyes on the release of the latest UK jobs data.
The FTSE 100 was called to open 40 points lower at 7,393.
CMC Markets analyst Michael Hewson said: "Investor concerns about the effects the coronavirus outbreak might have on future guidance expectations have thus far been dismissed by investors, as evidenced by recent record highs, not only in US markets but in European markets as well.
"This mindset may well change in the coming days given last night's unexpected revenue warning from Apple for the current quarter, which should act as a timely reminder, if any were needed to investors, that companies still need to meet their guidance forecasts. If Apple says they are likely to miss their forecasts then investors will need to pay attention to other companies with large exposure to the Chinese economy as well.
"Asia markets appear to have taken these concerns on board, sliding sharply this morning, with Apple suppliers in particular taking a beating, and with HSBC also revealing that it missed expectations on its latest numbers as a result of the problems in Hong Kong, today's European open looks set to be a weaker one."
On the data front, the ILO unemployment rate, claimant count and average earnings are all due at 0930 GMT.
"Today's jobs numbers are expected to show that unemployment for the three months to December remained steady at 3.8%, a 45-year low, with wages excluding bonuses expected to come in at 3.3%, slightly down from 3.4% in November," said Hewson.
In corporate news, HSBC announced a radical overhaul of its business to increase returns as the global bank reported a one-third fall in annual profit and wrote down more than $7bn (?5.4bn) of goodwill.
Pretax profit for the year to the end of December fell 33% to $13.3bn as revenue rose to $56.1bn from $53.8bn. HSBC's $7.3bn goodwill writedown included $4bn at its investment bank.
The FTSE 100 bank said it would cut $100bn of risk-weighted assets by the end of 2022 and reduce costs by $4.5bn. It targeted a return on tangible equity of 10-12% in 2022. The dividend will be sustained but there will be no share buybacks in 2020 or 2021.
First half earnings at BHP surged 29% on the back of higher iron ore prices as the dividend payout was tempered by short term caution over the coronavirus.
Underlying earnings at the world's biggest miner rose to $5.2bn from $4.03bn a year earlier. The interim dividend was increased 18% to 65 cents a share, reflecting "caution due to near term market volatility driven by the 2019 coronavirus disease outbreak, trade policy and geopolitics", BHP said.
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