HSBC record profit is spoiled by a $3 billion impairment charge

The US dollar

The USD will be under scrutiny on Wednesday. There could well be some more volatility around the greenback with the release of the Federal Open Market Committee (FOMC) minutes tonight. The Fed made it clear that they would not lower interest rates until they saw a decrease in inflation. And recent consumer price index (CPI) data has shown that inflation is not going down as quickly as expected.

The Federal Reserve

We could therefore expect some upside on the dollar. Since the beginning of the year, DXY has been following an upward trend as traders have been pushing back their expectations on when the Fed is likely to start cutting rates. The Chicago Mercantile Exchange (CME) FedWatch tool shows that there is only an 8.5% chance of a rate cut at the next Fed meeting in March. The probability rises to 35.2% for the May 1st meeting and to an 80% chance of a cut at the June meeting.

Japanese exports

Shipments of autos and car parts to the US and Chinese demand for chip-making equipment drove Japan's exports higher than forecast last month. Japan's exports rose 11.9% in January from the same month a year ago, faster than the 9.5% gain expected by economists. But one shouldn't read too much about that increase. The data is partly skewed by comparisons with very weak exports to China last year. Exports to China rose 29.2% year-over-year (YoY). A weaker JPY also played a part in boosting exports.

HSBC

HSBC posted a record annual profit, however, below analysts' forecasts. Pretax profit came in at $30.3 billion in 2023, up 78% on the previous year. Income was boosted by higher interest rates. It is, however, below the $34.1 billion anticipated by the market. The record-high annual profit was weighed down by a $3 billion impairment on the bank's stake in China's Bank of Communications. HSBC announced a fresh $2 billion share buyback and is considering a special dividend of 21 cents per share in the first half of 2024.

Rio Tinto

Rio Tinto reported an 11% drop in full-year underlying earnings. If iron ore production improved last year, it was countered by lower contributions from its aluminium business. Underlying earnings came in at $11.8 billion for 2023, compared with $13.28 billion a year earlier. That was broadly in line with the $11.7 billion anticipated by analysts. It declared a final dividend of $2.58 per share.

NVIDIA

After the US closes on Wednesday, all eyes will be on NVIDIA . The street anticipates EPS of $4.58 and revenue of $20.37 billion. For the same quarter last year, NVIDIA posted earnings of 88 cents per share on revenue of just over $6 billion. The NVIDIA data centre business, which comprises cloud and AI services, could see its revenue come close to $17 billion, more than four times the amount reported a year ago.