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U.K. stocks in holding pattern, even with big jumps by HSBC, Next

U.K. stocks showed little change early Wednesday, as big gains by banking giant HSBC Holdings PLC and retailer Next PLC failed to spark a broader inch higher.

The FTSE 100 UKX, -0.02% inched down 0.1% to 6,636.59 as a small early gain faded. The benchmark is basically trading water after closing lower for two sessions in a row.

Shares in HSBC HSBA, +3.20% climbed 3.8% after the bank said it will spend up to $2.5 billion in this year’s second half to buy back shares, though it also reported that second-quarter net profit plunged 40% to $2.6 billion.

HSBC’s surprise stock buyback, using proceeds from the sale of its Brazilian business, looks like an attempt to “paper over the cracks” of a slowed-down strategy and delay in reaching its 10% return on equity target, Shore Capital analyst Gary Greenwood told Dow Jones Newswires.

Bank shares overall were stabilizing somewhat after the prior day’s drubbing, which came as regulatory and stress-test concerns weighed on the U.K. bank sector. Shares in Royal Bank of Scotland Group PLC RBS, +1.51% were up 0.1%.

Shares in Next NXT, +3.80% gained 4.6% after it posted an improvement in sales in the second quarter. But the British clothing retailer warned that the pound’s fall in after the U.K.’s Brexit vote will likely result in higher costs next year.

Among the decliners, Intercontinental Hotels Group PLC’s stock IHG, -0.61% dropped 1%. The hotel chain operator reported lower profit in its earnings report Tuesday.

“The market continues to digest yesterday’s numbers — and brokers refuse to budge on their outlook for the business, despite the rather more robust claims of management,” said Tony Cross, a Trustnet Direct market analyst, in a note.

Waiting for BOE: The pound GBPUSD, -0.0674% wasn’t moving much against the dollar, changing hands at $1.3319.

Investors are waiting for a Bank of England rate decision due Thursday.

“Sterling is holding up well ahead of tomorrow’s BOE announcement,” said Tobias Davis, head of corporate treasury sales at Western Union International Bank, in a note. He highlighted “building expectations that the U.K.’s central bankers “may be a little more creative than usual.”

On Wednesday, a July reading on the U.K.’s service sector is due at 9:30 a.m. London time, or 4:30 a.m. Eastern Time.

Source: MarketWatch

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