Shock departure at HSBC and BBA Aviation grounded

“The markets are firmly in risk off mode, with precious metals miner Fresnillo the only FTSE 100 stock in positive territory as demand surges for traditional safe havens like silver or gold,” says AJ Bell Investment Director Russ Mould.

“The rest of the mining sector is firmly on the back foot amid mounting trade war concerns and a devaluation of Chinese currency."

HSBC

“A change at the top of Europe's largest bank HSBC may come as something of a shock to the market. Departing CEO John Flint only started in the job at the beginning of 2018 and you would expect it to take much longer to turn around such a super-tanker of a business.

“The relatively abrupt move, apparently taking place by mutual consent, is not typical for HSBC and, for all the emollient words around his departure, hints at some kind of culture clash between senior management or a background issue.

“The former would be surprising given Flint had spent his entire career at the bank.

“At least he is leaving on something of a high with first half results coming in slightly better than expected. The company has backed up its first quarter progress on costs, continuing to deliver positive ‘jaws’, or in plain English growing income faster than operating expenses.

“However, the task for his replacement could be a tall one. Something which is reflected in the downbeat comments on the outlook, with a shift back towards a negative trend for global interest rates not helpful to the banking industry.”

BBA Aviation

“Investors have often extolled the virtues of pursuing a 'picks and shovels' approach. The phrase points back to the savvy traders who made a mint selling equipment to those who participated, often with no great success, in the Klondike gold rush.

“BBA Aviation in effect does the same for the airline industry, selling parts, offering repair and maintenance services, handling cargo and more, and as such could be considered insulated from issues like rising fuel costs, over capacity and industrial action which have grounded its customer base.

“In part this explains why its shares are up strongly so far in 2019 while the likes of EasyJet, Ryanair and British Airways owner IAG have been losing altitude.

“However, there is a limit to how far this logic can go and today's first half results demonstrate that. The company uses the dreaded term 'broadly' in line with expectations to describe the numbers, code for not quite up to scratch.

“This, in part, reflects exposure to struggling European airlines, and the weak performance here explains why the company is so focused on the US for future growth.

“With the proposed sale of its parts business announced last month, all the attention will be on its Signature business, which provides in-airport services such as refuelling.

“As such investors may not have been too impressed by the modest decline in return on capital, weaker cash flow and limited organic growth served up by this business.”

These articles are for information purposes only and are not a personal recommendation or advice.