FTSE 100 fails to keep the bullish momentum going, HSBC shares plunge after shocking Q4 earnings

By Daniela Hathorn11:22 (UTC), 21 February 2024

Logo of "HSBC" on top of building and business building background - source: shuttershock

The FTSE 100 has snapped a four-day winning streak which had attempted to undo the recent weakness that had made it one of the worst performing stock indices since the beginning of February. The weaker-than-expected CPI released last Wednesday seemed to revive the bullish appetite amongst FTSE 100 traders which was reinforced on Thursday after the preliminary Q4 GDP reading suggested the UK economy had entered a technical recession in the second half of 2023. This allowed markets to put greater weight on rate cut expectations from the Bank of England which would be seen as giving the economy more room to grow, driving risk appetite higher.

FTSE 100 daily chart

Past performance is not a reliable indicator of future results.

But buyers have faced increased challenges this week and failed to move above 7750, a level of resistance that has stopped several advances since May last year. The reversal has pushed the RSI back below 60, a level that buyers will want to keep an eye out for continued bullish momentum. A close above 7750 will be needed to encourage more appetite to push higher, with 7769 the key level to topple in the short term.

HSBC plunges over 7% after earnings shrink in Q4

HSBC shares plunged over 7% on Wednesday morning after the latest earnings showed the bank had failed to meet profit estimates in 2023 as fourth-quarter earnings dropped significantly. Analysts were expecting 4.5 million pounds in pre-tax profits in the last three months of the year, but the actual figure came in just below 1 million. This led to a smaller yearly figure than analysts were estimating despite higher interest rates, which weighed on the company’s stock. The significant loss in Q4 is due mostly to one-off events but it makes the report messy and raises concerns over the bank’s high exposure to China, given growth concerns continue in the region. Banks are expected to have to increase provisions for credit losses from commercial properties in China as the property market continues to face turbulent times following the collapse of Evergrande.

HSBC daily chart

Past performance is not a reliable indicator of future results.