- FTSE 100 with cautious open following gains in the US and ChinaNew HSBC boss eyes cost cutsS&P 500 posts its 44th all-time highBrent oil hovers around $77 per barrelGSK settles Zantac cases for $2.2bn
Matt Britzman, senior equity analyst, Hargreaves Lansdown:“The FTSE 100 opened broadly flat this morning, trying its best to latch on to positive moves from the US where the S&P 500 notched up yet another all-time high. The China trade also made a small comeback, providing a positive tailwind for global markets as investors mull over the impact of a new 500-billion-yuan swap facility to support stock purchases. The general consensus is that more stimulus is needed to sustain a bull run, and the focus now turns to an expected briefing on Saturday where the hope is further fiscal stimulus will be announced.Reports are swirling that HSBC’s new boss, Georges Elhedery, is eyeing cost savings by combining its Commercial Banking and Global Markets & Banking businesses. The number being touted is $300mn in cost savings, and while that sounds good on the face of it, the combined businesses have a cost base of around $9bn, so one might expect a little more.Despite all the turbulence of late, the S&P 500 hit its 44th all-time high yesterday evening, up a staggering 66% from the October 2022 lows. Fed minutes showed that not all committee members were in favour of last month’s jumbo rate cut, but the key rhetoric for markets was hearing that they had gained greater confidence that inflation was moving sustainably toward 2%. All eyes are now on CPI inflation data out later today, while it may not be the Fed’s preferred inflation measure, it still has the power to move markets.Brent crude oil futures are trading around $77 per barrel after two days of declines, driven by concerns over potential supply disruptions from tensions involving Iran and the effects of Hurricane Milton. But prices remain under pressure due to signs of ample supply, as US crude inventories rose more than expected, along with a weak demand outlook underscored by China’s lack of new economic stimulus details.”Derren Nathan, head of equity research, Hargreaves Lansdown:“Pharma giant GSK has taken a giant leap towards drawing a line under the long-running legal battle concerning alleged cancer to heartburn remedy Zantac. It’s agreed to settle around 93% of cases pending in the US State Courts for a payment of up to $2.2bn as well as an additional $70mn in a separate but related action. In sterling terms, it’s expecting to recognise a £1.8bn charge for the settlements, which also covers the remaining 7% of outstanding claims, with some analysts seeing scope for the final quantum to come in a little lower. This is a significantly better outcome than initially expected, with some estimates standing at as much as $45bn just a couple of years ago. Since then, GSK and other drugmakers implicated in the case, Sanofi and Boehringer Ingelheim, have seen several key rulings go in their favour. GSK continues to accept no liability.
Looking ahead, GSK’s operational performance should be the key driver of investment. Execution has been impressive of late, with two upgrades already in the bag this year. There have been some headwinds for key vaccine programmes Arexvy and Shingrix. But recent emerging longer-term data for Arexvy against Respiratory Syncytial Virus (RSV) has been positive. And overall, recent clinical progress elsewhere in the portfolio has also seen a bigger share of successes than failures. The upcoming Zantac settlements substantially derisk the investment case for GSK shares which are trading at a hefty discount to the sector, meaning this could be an opportune time to consider increasing exposure to the stock.”