Market buzz: FTSE 250 outshines sibling as HSBC weighs, look forward to Lloyds

1745: Tomorrow is a big, big day in the financial calendar - especially with respect to interest rate expectations on both sides of the Atlantic. In the morning we have crucial UK labour market data that could heat up or cool down anticipation of the Bank of England's rate-hike path for 2018. Later the FOMC minutes from the last policy meeting will be pounced upon by Wall Street for a close reading to spot any slight change in nuance over rates. In between we have initial Eurozone purchasing managers' surveys and as an entrée there will be a host of corporate results, inlcuding from Lloyds Banking Group, Glencore, Barratt Developments and Metro Bank.

In the Wednesday market preview, RBC Capital Markets says the FOMC minutes for the January meeting "should garner a great deal of attention", given the market’s obsession with inflation and the great potential for the minutes to be interpreted as "reinforcing this narrative of a firming inflationary backdrop".

Closer to home, December's labour market report, "will be scanned by markets, which are pricing-in a 60% chance of a May rate hike, for signs that the labour market is continuing to tighten and wage growth is accelerating", says Pantheon Macroeconomics. However, the economists expect "modest disappointments on both scores".

It's a big day for Lloyds too, as CEO Antonio Horta-Osorio is expected to set out plans for the next three years alongside full year results.

UBS says: "What matters most, we think, to investors, however, is the outlook for margin over the coming three year strategic period."

1645: Tuesday's London close market report saw stocks fell less than one point, as solid results from HSBC and BHP Billiton failed to please demanding investors but currency traders were more taken in by Brexit reports. The FTSE 100 closed 0.89 points or just 0.012% lower at 7,246.77, while the pound recovered from earlier losses against the dollar to climb to a flat 1.4002 and gained 0.6% versus the euro to 1.1350.

1620: The internationally focused FTSE 100 is in the red but the more domestically exposed FTSE 250 is firmly higher. The blue chip index's losses come as traders continue to fear the tightening implications of a hawkish shift in monetary policy thanks to rising inflation, says analyst Joshua Mahony at IG.

"The news of a potential breakthrough in Brexit negotiations has seen the pound push higher, with a 60-page proposal from the European Parliament raising the likeliness of a bespoke deal that could see the UK retain single-market access.

"While the internationally focused FTSE 100 has moved lower given the negative impact of a strong pound on internationally located firms, the positive implications of today’s Brexit breakthrough seems to have been better reflected on the domestically focused FTSE 250 index. "

The 100 is down 0.1% at 7,242.16, with the fallers being led by giants HSBC and BHP, while the FTSE 250 is up 0.8% at 19,806.64, with the 250 movers are led by Fidessa's 24% gain on a potential offer and Hikma's 5% rise after appointing a new CEO.

1550: An energy update from Capital Economics, in short: "US natural gas prices should rise this year as domestic demand and LNG exports experience an upsurge. However, a jump in supply will limit the increase in prices."

Economist Thomas Pugh sees the rate of closure of coal-fired power plants is likely to accelerate over the next few years, despite Trump’s rhetoric,which should increase demand for natural gas-fired power. We also expects the US economic growth to accelerate this year which should boost demand for electricity, chemicals and fuels.

But with the EIA expecting output to grow by almost 10% this year to a record of more than 86 bcf/d, Pugh forecasts US natural gas prices to average about $3.2 per mBtu this year, up from about $3.0 per mBtu in 2017.

1515: Parliament's Treasury committee has published the official report prepared for the Financial Conduct Authority into Royal Bank of Scotland’s treatment of small businesses in its GRG arm. After the Committee decided to publish what would normally be a confidential report, chair Nicky Morgan does not hold back: "The findings in the report are disgraceful. The overarching priority at all levels of GRG was not the health and strength of customers, but the generation of income for RBS, through made-up fees, high interest rates, and the acquisition of equity and property.

"The Committee has not taken the decision to publish lightly. Normally, reports prepared under section 166 are confidential, but there is overwhelming public interest in bringing transparency to what happened at GRG, given the earlier leak of the report, and in ensuring that everyone can see, and know that they are seeing, an authentic and verified copy of Promontory’s original report."

1425: Britvic’s share price declined sharply post its first-quarter statement on 31 January and in absolute terms has fallen by 15% in the past month and closer to 20% peak to trough, notes analyst Phil Carroll at Shore Capital.

After moving to a negative stance on the stock in December due to concerns over valuation especially with the uncertainty of sugar tax ahead, he now believes Britvic shares "look compelling". Carroll's forecasts are below consensus expectations and there is a prospect of a "rising attractive free cash flow yield" once the drink-maker emerges from its three-year capital investment programme. Therefore, ShoreCap's recommendation has been upgraded from 'sell' to 'buy'.

1356: Jamie Constable at broker N+1Singer is waxing lyrical about MJ Gleeson after a meeting with management, which he said confirmed to him why the stock trades at the top of the valuation table for the house builders.

"This is a secular growth story addressing the affordable housing market. 1) as the minimum wage rises each year their addressable market of potential customers grows. 30p per hour on the minimum wage adds £2000 to the mortgage people can afford in a year and it will rise again in April 2018 and so on. 2) 60% of their buyers use Help to Buy but only 50% (of the 60%) of buyers need it and of these 15% are trading up so it is really only the second 15% who really need it – basically they would just save for a few months longer to buy if it was removed 3) their average buyer spends only 18% of take home pay on against 25%+ for the other housebuilders. A 1% rise in interest rates would typically only add £8 to their mortgage servicing cost if they aren’t on fixed rate. 4) they started the year with 7 regional divisions and have 3 new ones in “pilot” showing that there is plenty more growth for this company to go for as they expand geographically and this is on top of their continued growth in existing territories."

The company is a core smallcap 'buy' for the broker.

1347: Credit Suisse labels HSBC results "somewhat disappointing" as the lender's profits before tax missed the consensus estimate by between 7% to 8% and the lack of any by-back announcement, noting that the latter may mark a change in the capital return strategy versus the $3bn they have penciled in. Yet despite having lowered its estimates it nudged its target price higher from 650p to 680p.

Their colleagues also downgrade Reckitt Benckiser following a disappointing FY18 outlook yesterday and a results meeting that "left some important questions unanswered". Earnings estimates for 2018-2020 are cut 5-7%, resulting in the target price being cut to £63 from £75 and the rating being cut to 'neutral'.

1222: The euro is under pressure against the pound and dollar amid reports that the EU parliament is preparing its own post-Brexit plan that which would see the UK given special associate status.

The European parliament is said to be preparing a detailed 60-paragraph resolution which will call for more flexibility in future relationship talks with Britain.

"This kind of bespoke deal is exactly what the pair need, an acknowledgement of their shared history and mutual dependency, and the fact it comes from arch-federalist Verhofstadt gives it extra weight," says analyst Chris Beauchamp at IG. "Is sanity about to prevail?"

David Cheetham at XTB added that these latest developments reveal some possible cracks in the EU's hardline approach and "are the clearest sign yet that the bloc may accept preferential terms as far as trade is concerned post-Brexit".

He said the most positive part of the reports were that the EU to negotiate an association agreement which could give Britain “privileged” single market access and membership of EU agencies.

1149: The pound has lost ground since the CBI industrial trends survey came out. It's down 0.15% on the dollar at 1.3979 and earlier gains on the euro have been trimmed but its still up 0.3% at 1.1320.

The CBI’s total orders balance fell to +10 in February from +14 in January, missing the consensus forecast of +11.

"The further decline in the CBI’s total orders balance in February indicates that the support to growth in manufacturing output from sterling’s depreciation is beginning to fade," say economists at Pantheon Macroeconomics.

While both balances remained in the top 10% of all past readings in the last 30 years, and the output expectations balance is consistent with quarter-on-quarter growth in manufacturing output of about 0.5%, Pantheon says the boost to growth from sterling’s depreciation will continue to fade as this year progresses.

With the rise in oil prices over the last six months forcing producers to raise prices sharply in February and January, Pantheon adds: "Sharp rises in oil prices in 2008 and 2011 contributed to subsequent downturns in manufacturing output, and while the recent increase in prices has been much smaller, past form suggests that its dampening effect on production will grow this year. Accordingly, last year’s strong upward momentum in the manufacturing output likely won’t be sustained."

1130: InterContinental Hotels Group’s shares are down more than 4% despite full year results confirming continued growth in revenues and profits. But while an increased final payment of $0.71 per share takes the full year dividend to $1.04, up 11% year-on-year, due to costs associated with implementing a strategic review of the business the group will not be paying any further special dividends in 2018.

Analyst George Salmon at Hargreaves Lansdown is confident IHG will be able to pick up where it left off in 2019: “The strategic review implies the group will be improving the services it offers its hotel franchisees and picking up a few more luxury brands, but the changes are more about how IHG pursues growth than a significant change in where that growth will come from.

"The fact another 83,000 rooms have been added to the pipeline mean the investment case for IHG remains broadly unchanged. The group has ambitious growth plans, and its weighting towards China means it’ll continue to be a play on economic expansion in the Far East. Adding extra services should tie it ever-closer to its franchisees, and a more loyal customer base should give higher-quality revenues."

1039: 21st Century Fox has strengthened its commitments to invest in Sky's UK news channel as it looks to tip the balance with competition authorities over the takeover. In a letter to the Competition & Markets Committee, which is still mulling some "firewall remedies" submitted earlier this month, Fox offered to increase to 10 years the US group's commitment to run a Sky-branded news service from the five years previously indicated.

0941: HSBC, with its 7% weighting of the FTSE 100, is depriving the blue-chip index of a valuable 21.5pts this morning, says analyst Mike van Dulken at Accendo Markets as the index stands at 7,226.88, with a 20.78 or 0.29% decline so far in the session.

HSBC's shares are down 4.4% after full year results failed to meet market expectations, even though adjusted profits surged more than sixfold to $9.7bn on revenues up 7% to $51.5bn. However, a more than doubling of pre-tax profits to $17.2bn still missed $19.5bn analyst expectations after the collapse of Steinhoff and Carillion swelled fourth-quarter bad loan charges by 40%.

"And when investors have become rather accustomed to a supportive share buyback programme ($5.5bn so far; $3bn last year) any pause, especially to raise more capital ($5-7bn) to strengthen the balance sheet, only adds to the disappointment along with a flat dividend, even if loyal income seekers may only have to wait until the second half of the year for the buybacks to resume," van Dulken says.

"No CEO likes to see their shares trade lower on results day, let alone your last day in the office. However, departing with an 8 out of 10 report card (2015 targets set by himself), the share price significantly off Brexit lows, the bank’s reputation much stronger and revenues back to growth, I think he’ll be more than able set sail into the sunset rather content with what he has achieved for investors over seven years, rather than focusing too much on what markets think about the latest quarter."

0855: The biggest riser this morning is Fidessa, up more than 20% after the financial software outfit confirmed "advanced discussions" about being taken over by Swiss banking software group Temenos.

The biggest faller is Dunelm, where profits dipped in the first half of the year and chief financial officer Keith Down said he will leave the company in June. The financials were largely pre-released last month and the company is confident the full year will see it return to profits growth.

0838: London stocks nudged lower in early trade on Tuesday following investor disappointment in results from HSBC and BHP Billiton, though both issued fairly strong numbers. At 0830 GMT, the FTSE 100 was down 0.1% to 7,242.33, while the pound was off 0.3% against the dollar at 1.3956 and 0.1% firmer versus the euro at 1.1290.

The pound was moving as traders eye a speech by Brexit secretary David Davis later in the day. He is expected to tell business leaders in Austria that worries the Tories will plunge Britain into a "Mad Max-style world borrowed from dystopian fiction" after leaving the EU are unfounded.