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Optimism about the potential for a US-China trade agreement was helping to create a cautiously positive mood in markets at the start of the week.
In the UK market, the mining sector moved higher, bar the precious metal contingent who were hit by lower gold prices, although negative news for index heavyweight HSBC acted as a drag on the FTSE 100.
A milder than expected reading of US inflation at the end of last week also proved supportive to sentiment. Although investor confidence may be tested during a busy week for corporate news across the Atlantic, including earnings from the likes of Microsoft, Apple, Amazon and Meta.
HSBC
As Halloween approaches, an episode out of what feels like the dim and distant past has returned to haunt HSBC and hardly set the scene for the bank’s third-quarter update tomorrow in a way it would have wanted.
A ruling from Luxembourg’s highest court on a lawsuit, brought by investors who lost money in Bernard Madoff’s multibillion-dollar Ponzi scheme, will see HSBC set aside a material sum. Although, it is testament to the bank’s scale that a provision of more than $1 billion is a relatively minor irritation rather than a disaster.
Several HSBC businesses provided custodial and administrative services to funds whose assets were invested with Madoff Securities, including HSSL, the company’s Luxembourg securities arm which is affected by this legal action.
Impairments marred the company’s second-quarter numbers too, with the company affected by its exposure to a struggling Hong Kong commercial property sector.
CEO Georges Elhedery’s restructuring plan for HSBC has, for the most part, been well received since he took charge just over 12 months ago.
However, this latest setback, following on from a poorly received decision to put buybacks on the back burner as HSBC puts cash towards buying out minority investors in Hong Kong lender Hang Seng bank, does put the chief executive under a bit of pressure.
The recent departure of chair Mark Tucker means he is lacking a bit of boardroom support too.
Goodwin
It doesn’t get talked about a lot but the UK has several engineering success stories, a good portion of which are listed in London.
Among these under-the-radar winners is Goodwin which has just announced a genuinely exceptional set of results.
The Stoke-on-Trent based outfit delivers precision-engineered parts and materials to a global client base across the aerospace, automotive, construction, defence, energy, mining and minerals processing and semiconductor industries.
It expects profits to double in the current financial year and has announced a bumper special dividend. This has helped the shares surge to new record highs, having more than doubled since the summer.
Greencore/Bakkavor
While the CMA seems to be largely relaxed about the merger between Bakkavor and Greencore, the slight issue flagged about own label chilled sauces has caused a touch of market disquiet.
Given these operations account for a slim percentage of revenues across any combination, coming to an arrangement which the competition authority should not prove too difficult. However, it could still push the timetable for completing the transaction out a little.
Russ Mould: Investment Director
Russ Mould is AJ Bell's Investment Director. He has a Master's degree in Modern History from the University of Oxford and more than 30 years' experience of the capital markets.
He started out at Scottish...
