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Markets rattled by Putin’s order to send troops into breakaway regions of Ukraine.
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Oil shoots up 2.3% to above $97 a barrel to hit 2014 levels.
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HSBC puts pandemic bad loans behind it, but clouds remain over China’s property crisis.
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Marriott owner International Hotels Group bounces back with higher occupancy rates.
Susannah Streeter, senior investment and market analyst, Hargreaves Lansdown comments on the latest market moves:
‘’With Putin’s order to put boots on the ground in breakaway regions of Eastern Ukraine, fears that war will be increasingly impossible to avoid has jolted financial markets. The ominous turn of events has escalated the already highly tense situation, with chances of a diplomatic breakthrough fading away and the fresh sanctions set to hit Moscow. A barrel of Brent crude leapt 2.3% up above $97 dollars, its highest level since September 2014 amid nervousness of a constraint of supply from Russia, at a time of high global demand and lower inventories elsewhere.
The darkening skies over Ukraine and concerns about the knock on effect for companies and consumers already reeling from higher energy prices, contrast with the much brighter results coming through on the corporate side. HSBC has put pandemic bad loans behind it and profits are set to pour in at a much greater rate than initially forecast. It already almost doubled pre-tax profits in Q4 with borrowing rising sharply as business and consumer confidence returned. But China’s property woes clearly remain a cause for concern for the Asia focused bank. The market is having a less than savoury response to higher than expected impairment charges, a lot of which relates to uncertainty in the Chinese commercial real estate sector. This is certainly something to be keeping an eye on. The Goldilocks dilemma is also evident in this update, as HSBC needs inflation to tick up enough to prompt rising rates, but not be so hot it makes customers nervous about taking on new borrowing, which could dent its loans business. The group’s enormous exposure to Asia also means recent rate hikes in other regions don’t have as much of a bearing on these results. With some speculation Asian economies could drag their heels on increasing rates, that’s unlikely to change. However, that lower base also means there’s more opportunity for growth in the future.
For now, many consumers are shrugging off higher prices and the urge to spend has helped International Hotels Group. Even though international travel has still been more limited with the rampaging effect of Omicron, a surge in staycations in the US has helped the Marriott owner beat expectations. What has also boosted the numbers is that tourists are opting to stay in resorts rather than cut price breaks, clearly keen to reward themselves after the frustration of missed holidays during the pandemic. Demand has picked up strongly with revenues per room back at 83% of pre-pandemic levels in the last quarter, with vaccinations now providing a big dose of confidence for overseas trips, with many customers likely to be spending savings piled up during the pandemic. But as the cost of living squeeze intensifies, there still may be challenges ahead, and the group won’t be able to have business travel to fall back on as much as pre-pandemic days. Corporate travel is likely to stay more subdued, given we have become so used to the ease of virtual meetings, and companies are now more conscious about their environmental footprint.’’
