UKX FTSE 100 Index

By Carla Mozee, MarketWatch

HSBC is knocked down after reporting a loss

European stocks closed at their highest in more than a year Tuesday, finding support from upbeat eurozone data, but HSBC PLC shares suffered the most since 2009 in the wake of financial results from the London-based lender.

The Stoxx Europe 600 ended up 0.6% at 373.40, the best close since Dec. 2, 2015, and the 10th rise in 11 sessions. But the bulk of the advances were derived from oil, gas and technology stocks. The pan-European index on Monday rose 0.2%. (http://www.marketwatch.com/story/european-stocks-step-higher-led-by-rbs-rolls-royce-2017-02-20)

European equities climbed Tuesday after a better-than-expected preliminary reading on manufacturing activity in the eurozone (http://www.marketwatch.com/story/eurozone-economy-shifts-up-a-gear-pmis-show-2017-02-21). IHS Markit's February PMI gauge of eurozone manufacturing activity came in at 56.0, outstripping a 54.3 estimate from FactSet.

"European stock markets have enjoyed a positive day buoyed by an improving macroeconomic outlook," said Michael Hewson, chief market analyst at CMC Markets UK, in a note.

"This improvement in business activity in Germany and France came in at its highest levels since April 2011, though more concerning is the rise in prices, which is likely to ramp up pressure on ECB President Mario Draghi to start looking at measures to start tapering the ECB's bond buying program early," said Hewson.

Germany's DAX 30 surged 1.2% to 11,967.49, with the export-oriented market aided by a pullback in the euro against the U.S. dollar, below $1.06. The DAX notched its highest close since April 27, 2015.

   Meanwhile, France's CAC 40   closed up 0.5% at 4,888.76, snapping a three-day losing streak. 

But the yield on the 10-year French bond rose 3 basis points to 1.08% as prices continued to fall. The spread between French and German 10-year bond yields has hit its highest since March 2013, according to FactSet data. Investors are demanding a higher premium for French holding debt, with an eye to the first round of voting in the French presidential election in April.

Polls released Monday and late Tuesday (http://www.marketwatch.com/story/marine-le-pens-lead-widens-in-latest-electoral-poll-2017-02-21) showed far-right candidate Marine Le Pen pulling ahead of her two main rivals, a worry for some investors as she's called for France to leave the European Union and the euro. Read:French bonds drop, euro may retest $1.03 as Le Pen rises in the polls (http://www.marketwatch.com/story/investors-bidding-adieu-to-french-stocks-as-le-pen-gains-in-polls-2017-02-21)

HSBC slides: Shares of HSBC (HSBA.LN) (HSBA.LN) (HSBA.LN) tumbled 6.5%, the largest drop since March 2009. The slide was triggered after the Asia-focused bank reported a fourth-quarter net loss of $4.23 billion (http://www.marketwatch.com/story/hsbc-loss-widens-to-423b-plans-further-buyback-2017-02-21), widening from a loss of $1.33 billion a year ago. HSBC did say it plans to buy back an additional $1 billion of shares.

The extension of the share buyback is within HSBC's current cash resource, said Ken Odeluga, market analyst at City Index, in a note. "However, we think applause for the additional payout is somewhat muted, in view of HSBC's backsliding common-equity tier-one ratio."

Odeluga noted that the ratio was at 13.6% at the end of its year, compared with 13.9% in its third quarter.

"It's a modest retreat of regulatory capital, so direct consequences will be immaterial, but again, the timing is unfortunate," he said.

HSBC weighed on the U.K.'s FTSE 100 (http://www.marketwatch.com/story/ftse-100-in-the-red-as-hsbc-slides-but-bhp-billiton-advances-2017-02-21), leaving that index down 0.3% at 7,274.83.

Movers: Landing at the bottom of the Stoxx 600 were shares of John Wood Group PLC (WG.LN) , as they tanked 8%. The oil-services company's yearly net profit fell to $27.8 million (http://www.marketwatch.com/story/john-wood-yearly-profit-drops-but-dividend-raised-2017-02-21), from $79 million the previous year, as revenue fell.

Elsewhere in the commodities group, BHP Billiton (BLT.LN) (BHP.AU) (BHP.AU) shares closed up 0.4%, but off session highs. The world's largest miner by market value swung to a profit of $3.20 billion in its fiscal first half (http://www.marketwatch.com/story/bhp-billiton-returns-to-profit-raises-dividend-2017-02-21-04855710), aided by higher commodity prices and cost-cutting. BHP also said it's raising its dividend.

Economic docket: A rise in the price of energy and fresh produce lifted French inflation (http://www.marketwatch.com/story/french-inflation-up-13-on-year-lower-on-month-2017-02-21) in January, according to national statistics agency Insee. France's Consumer Price Index increased 1.3% on the year, but was 0.2% lower on the month.

The euro was buying $1.0545, compared with $1.0609 late Monday in New York. The dollar rose against most major rivals after Philadelphia Federal Reserve Bank President Patrick Harker, in an interview with Market News International, said he would likely support an interest-rate increase in March (http://www.marketwatch.com/story/dollar-rises-after-fed-comments-euro-weakens-2017-02-21) if he sees additional evidence that U.S. inflation is gaining momentum.

(END) Dow Jones Newswires

February 21, 2017 13:58 ET (18:58 GMT)

FTSE 100
Index Chart
From Mar 2024 to Apr 2024

FTSE 100
Index Chart
From Apr 2023 to Apr 2024