HSBC soared 6% to push the FTSE 100 to a record high as investors continue to scale the wall of worry about AI, tariffs and everything else. The point is that outside of the US, global stock markets are looking in pretty good shape as investors pivot into other sectors and geographies. Stock markets in Japan, South Korea and Australia hit record highs in Asia overnight as well. Even US tech and software got some respite as Wall Street rallied yesterday to pinch back some of the recent losses with the S&P 500 still holding a tight range since December. Yesterday the S&P 500 and the Dow rose both 0.8%, and the Nasdaq Composite gained 1.0% as some fears about AI eased with commentary from Anthropic seen in a positive light and AMD rising almost 9% after doing a multi-billion-dollar chips deal with Meta. Donald Trump delivered the longest State of the Union address on record and reiterated his tariff policy would remain in place.
This morning, the FTSE 100 rose about 0.8% in early trade Tuesday to above 10,778 for another record high. It came as strong results from HSBC lifted the heavyweight and mining stocks rallied as copper and gold prices rose. Spot gold was approaching $5,250 yesterday before paring gains a touch to $5,183 this morning. Copper rallied for a second day to trade at a two-week high above $601. Antofagasta +3.75%, Anglo American +3.27%, Endeavour Mining +2.43% reflected strength in the mining space. Metlen Energy & Metals rose as it announced an LNG deal with Shell and Valterra Platinum bounced 8% as it reported earnings before nasties +68%, on higher platinum prices and production with refined production of 3.4 million PGM ounces above guidance. A 5% jump in platinum futures this morning is helping.
AI flip flop: US software names got some relief at last as the latest AI narrative flip flop suggested it's not all doom and gloom for the sector. The latest twist came as Anthropic said its plugins would work with existing software and platforms rather than replace them. This was a bit of a relief after that Citrini Research report warning about an AI-driven collapse in the labour market. It goes to show that these markets are not pricing fundamentals but fear and greed from an unknown future economic model that I don't believe anyone really understands fully. To that end, we have seen RELX, St James's Place, LSEG rise 2-4% in early trade. AMD's mega chips deal with Meta also showed there's no plan to slow capex spend among the hyperscalers, which was seen as a positive - Meta also rose a touch.
As I noted a couple of weeks ago - Enterprises are unlikely to unpick billions and billions of sunk costs in software infrastructure to move across to AI. Large enterprises own vast amounts of their own data that they have accumulated over decades, which is completely integral with existing software and cannot be easily replicated by AI tools. The depth of data and the entrenched role in customer workflows may make many (all?) software service providers more likely to life side-by-side with AI rather than be replaced by it. Moreover, many would make that point in the advisory space – such as wealth management – that face-to-face, human interaction is becoming more, not less, important. But in a winners-and-losers sense those who integrate and use AI tools the best will thrive, whilst others will be left behind. Nevertheless, there are clearly genuine concerns about AI disruption in this space that investors should not ignore.
Of course, the key test comes after the closing bell tonight with Nvidia earnings on deck.
Elsewhere, crude oil futures eased back ahead of talks between Iran and the US in Geneva tomorrow. Trump set out the case for a possible attack on Iran in his SOTU address last night but stressed he still favours diplomacy. The scale of the US military buildup in the region, however, signals only one course of action. The timetable is set by the military planners not by the pace of talks.
The yen fell against the dollar as Japan's PM Takaichi nominated two dovish academics to the BoJ. The Aussie strengthened as inflation data raised the prospect of another hike by the RBA in May. Sterling rose against the US dollar but cable is running into fierce resistance at the 50-day SMA around 1.3535 which it's rejected again after coming off this level twice this week already, coinciding with the 61.8% retracement level
Companies
Diageo’s Drastic Dave strikes - the new boss of Diageo took the ‘difficult’ decision of cutting the dividend payout at the drinks maker to ‘a more appropriate level’ amid its ongoing challenges and cratering share price ove the last 4 years, though there have been nascent signs of a recovery this year. The divi was halved from 103.5p to at least 50p a year. The move reflects the problems facing Diageo and while drastic, is clearly necessary as Lewis also signalled a broader reset in strategy. Shares were down 5% - tough medicine can be hard to swallow but stock remains +10% YTD and has a firm hand on the tiller.
It came after the company reported net sales of $10.5 billion declined 4% in the final six months of 2025 due chiefly to weakness in the US and China, which more than offset strong organic net sales growth in Europe, Latin America and Caribbean (LAC) and Africa. For 2026 the company guided organic net sales down 2-3% given further weakness in the US and Chinese white spirits. Organic operating profit growth is forecast to be flat to up low-single-digit, which reflects the revised net sales guidance due to the US, as well as Chinese white spirits and the impact of tariffs, which is about $200mn, though the business hopes to mitigate about half of this. The guidance has not been updated post the Supreme Court ruling – it assumes a 10% tariff remains on UK and 15% on European imports into the US, and that Mexican and Canadian spirits imports into the US remain exempt under USMCA.
HSBC jumped 6% as full-year profits fell but beat expectations and the bank is on track to deliver about $1.5bn in cost savings 6 months early. Q4 profits jumped but were short of expectations, though this didn’t disguise a strong print and improved targets as investors dial in on the prospect of a resumption of buybacks.
HSBC raised the profitability target to a 17% RoTE or better, excluding notable items, in each year from 2026 to 2028. The bank is also targeting year-on-year revenue growth over the same period on the same basis, rising to 5% in 2028.
Reported full-year profit before tax decreased by $2.4bn to $29.9bn, mainly due to a $4.9bn year-on-year impact from a number of one-off charges including impairment losses of $2.1bn related to BoCom, $1.5bn on the sale of French loans, legal provisions of $1.4bn and restructuring and other related costs associated with the broader organisational simplification of $1.0bn. Profit after tax decreased by $1.9bn to $23.1bn.
Stripping out the exceptional items, constant currency profit before tax excluding notable items increased by $2.4bn to $36.6bn, thanks to a strong performance in its wealth business and wholesale transactional banking in the Corporate and Institutional Banking business. Fee income from these businesses drove revenues +4% to $68.3bn. This was partly offset by a rise in expected credit losses and other credit impairment charges and an increase in operating expenses due to planned investment and inflation.
HSBC said it won't resume buybacks until its capital ratios improve, potentially extending the pause of three quarters previously announced. The bank targets common equity tier 1 ratio of 14-14.5% but it's fallen below this following the privatisation of its Hang Seng Bank, which had a net CET1 capital impact of 110bps in January 2026. HSBC had ended the year with a CET1 ratio of 14.9%.
