European stocks edge higher; strong HSBC results boost tone

Published 05/02/2023, 03:24 AM
Updated 05/02/2023, 03:42 AM
© Reuters.
- - European stock markets largely edged higher Tuesday, helped by positive earnings from banking giant HSBC ahead of the start of the crucial Federal Reserve policy meeting as well as the release of the latest Eurozone inflation data.

At 03:25 ET (07:25 GMT), the DAX index in Germany traded 0.1% higher and the FTSE 100 in the U.K. gained 0.2%, while the CAC 40 in France dropped 0.1%.

HSBC (LON:HSBA), Europe’s largest bank by assets, reported a tripling of quarterly profit, as rising interest rates worldwide boosted its income and helped it pay a first quarterly dividend since 2019.

These stellar results have helped to prop up the banking sector in Europe, with HSBC stock 4% higher, following a troubled period which has seen Credit Suisse taken over under duress by Swiss rival UBS (SIX:UBSG) and three smaller U.S. banks collapsing.  

In other corporate news, BP (LON:BP) stock fell 3.7% despite the energy giant posting a $5 billion profit in the first quarter of 2023, up from the previous three months on the back of strong oil and gas trading.

That said, this still represented a drop from the $6.25B recorded in the first quarter of 2022, and the company also pared back its share buyback program.

The day’s economic news was more mixed, as German retail sales slumped 2.4% in March, a hefty annual fall of 8.6%, while U.K. house prices rose 0.5% in April, climbing for the first time in eight months in April, according to data from Nationwide, halting the worst slump in 14 years.

Preliminary inflation data for the eurozone in April is due later in the session, and is likely to remain elevated, providing the European Central Bank with more reason to hike interest rates again on Thursday.

The Eurozone CPI is forecast to rise 0.9% on the month in April, an annual gain of 7.0%, while the core figure, which excludes volatile food and energy prices, is seen up 1.1% on the month and 5.7% annually.

The Reserve Bank of Australia surprised markets earlier Tuesday with a quarter-point rate hike, when most had been positioned for it to stand still, putting the focus clearly on Fed policymakers as they begin their policy meeting later Tuesday. 

The U.S. central bank is widely expected to announce an increase in rates of a final quarter point and then signal a pause as it assesses its year-long tightening campaign. 

Oil prices steadied Tuesday after the previous session’s losses, as traders await another Federal Reserve interest rate hike as well as an expected drop in U.S. crude stockpiles.

Data from the industry body American Petroleum Institute, due later in the session, are expected to show another fall in U.S. crude inventories, dropping for a third consecutive week and providing some support to the market.

By 03:25 ET, U.S. crude futures traded 0.2% higher at $75.84 a barrel, while the Brent contract rose 0.3% to $79.56.

Both benchmarks dropped more than 1% on Monday after official data showed that China's manufacturing activity unexpectedly fell in April. 

Additionally, gold futures fell 0.1% to $1,991.10/oz, while EUR/USD traded 0.2% higher at 1.1000.

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