HSBC Holdings Share News (HSBA)

LONDON (Alliance News) - London's main stock indices closed higher Friday, meaning they also ended higher for the week, with HSBC Holdings the best-performing stock in the FTSE 100 on the day after it said it is undertaking a review which could see the bank decide to move its headquarters away from London due to increasing concerns about the strictness of the regulatory regime.

HSBC, which is the second biggest London-listed company by market capitalisation behind Royal Dutch Shell, is currently headquartered in London but the bank's shares are also listed in New York, Paris and Bermuda, as well as Hong Kong, which would be a possible destination should the group review conclude that a change of domicile is required.

HSBC's review into where it is headquartered is a sign that management takes seriously the increasing concern among analysts and investors that the group is being weighed down by the burden of the UK's levy on banks' balance sheets. HSBC paid USD1.1 billion towards the bank levy in 2014 and has said that 58% of the levy does not relate to its UK banking activity.

"As part of the broader strategic review taking place, the board has therefore now asked management to commence work to look at where the best place is for HSBC to be headquartered in this new environment. The question is a complex one and it is too soon to say how long this will take or what the conclusion will be; but the work is underway," Chairman Douglas Flint told shareholders at the banking group's annual meeting of shareholders.

Flint is also concerned over the UK's future in the European Union, with the Conservative Party planning to hold a membership referendum that's opposed by Labour. The UK Independence Party, which is currently third in the polls, wants an even quicker referendum than the Conservatives. Flint said the uncertainty about EU membership could have a telling impact on the economy and investors.

However, Berenberg Chief EconomistsHolger Schmieding thinks a British exit, or Brexit, from the EU is unlikely.

"An immediate referendum about staying in the EU would probably still have gone in favour of Europe. Opinion polls show a pro-EU majority and the status-quo bias that ultimately determined the Scottish independence vote would probably have weighed in favour of the EU as well," Schmieding said.

"If Cameron now remains Prime Minister with help from the Liberal Democrats, he will still call a referendum for 2017. But with some modest face-saving compromises between London and Brussels in the meantime and with the recent euro crisis and Greek headlines turning into a more distant memory over time, the probability for a clear pro-EU vote in 2017 looks reassuringly high," he added.

HSBC shares closed up 2.9%, after the stock hit its highest level since December 8.

The FTSE 100 ended the day up 0.2% at 7,070.70, meaning it was up 1.1% over the week, while the FTSE 250 closed up 0.3% at 17,729.36, and the AIM All-Share index closed up 0.4% at 753.74.

European stocks also pushed higher, with the French CAC 40 in Paris up 0.3% and the DAX 30 in Frankfurt up 0.6%.

When the European equity markets closed, the DJIA was up 0.1%, the S&P 500 was up 0.3% and the Nasdaq Composite was up 0.8%, boosted by Amazon, which reported first quarter results that exceeded estimates, and Microsoft which reported better-than-expected third quarter results.

The Eurogroup meeting in Riga, Latvia to discuss the financial troubles in Greece delivered no progress. Eurogroup Chairman Jeroen Dijsselbloem said there were still wide differences to cover and to bridge with Greek authorities, and funds will not be disbursed without a comprehensive deal.

"Time is running out," he told at the press conference following the meeting. "Too much time has been lost in the past two months".

"It is therefore clear that these discussions need to make significantly more progress, so that the institutions can give their green light on the comprehensive package which will then go to the Eurogroup for the political decision," he added.

Jasper Lawler, market analyst at CMC Markets, said the new Greek government have not met hopes that it could find a way to ease austerity measures and get access to much needed financing.

"Greece seemed unable to meet even the lowest expectations of making any headway at the latest round of talks with its European creditors. Finance Minister Varoufakis was signed up to shake things up and get Greece out of its crippling austerity, but so far his controversial persona seem to have just given his opponents the perfect excuse to dig their heels in," Lawler said.

The Brent oil price hit its highest level since December 10 in intraday trade, but then retreated causing oil-related stocks in London to close lower. Brent oil hit a high of USD65.75 a barrel, but fell to USD65.06 by the London close. West Texas Intermediate was trading lower at USD56.72.

Royal Dutch Shell 'A' shares and BP shares both ended down 1.2%. In the FTSE 250, Hunting ended down 3.3% and Premier Oil closed down 2.9%.

Pearson ended as the worst performer in the FTSE 100, down 3.0%. The publisher reiterated its full-year earnings guidance as the strong US dollar helped boost sales in the first quarter of 2015, and Chairman Glen Moreno announced his intention to step down in the next year. Moreno has been chairman for more than nine years. A committee headed by Independent Director Vivienne Cox will seek a successor.

Numis downgraded Pearson to Reduce from Hold, keeping its price target at 1,265 pence, following a recent strong performance in the Financial Times owner's shares. The broker believes Pearson shares are now fully valued, having risen 26% since December, reaching earlier this month levels it hasn't seen since March 2001.

AstraZeneca closed down 1.7% after the pharmaceutical giant also maintained its full-year guidance, as it posted a decline in core earnings per share and operating profit for the first quarter of 2015 due to continued investment into its pipeline of new drugs, and as generic competition to its maturing portfolio and the strong US dollar hit revenue.

However, a step-up in what AstraZeneca defines as "externalisation" revenue, meaning revenue from collaborations, commercialisation, partnerships and out-licensing deals and the sale of some of its products, helped drive up pretax profit in the quarter.

BAE Systems ended up 2.3% after it said it has started a review of part of its US Intelligence and Security business after getting a number of expressions of interest in the unit. The defence and aerospace group said its manpower and services businesses within the US Intelligence and Security arm, which spans technical, mission and IT support services and which predominantly serves the US government, has generated external interest and a number of enquiries.

Petra Diamonds was amongst the biggest fallers in the FTSE 250, closing down 3.6%. The diamond miner said it will launch a USD300 million note issue in order to fund the construction of a processing plant at the Cullinan mine in South Africa. Petra's lender group has also agreed, in principle and subject to the closing of the note issue, to increase its debt facilities by around USD81.6 million to USD302.4 million.

In the AIM All-Share index, Immedia Group closed up 12.5% after the digital audio content services company said it has secured a 12-month deal with BT Group, under which it will provide a digital radio channel to employees of its Openreach local network business using Immedia's mobile audio streaming platform.

In a quiet economic calendar Monday there is Confederation of British Industry industrial trends survey results at 1100 BST, US Markit services and composite Purchasing Managers' Index readings at 1445 BST and Dallas Fed manufacturing business index at 1530 BST.

In the UK corporate calendar, there is an interim management statement from British Gas owner Centrica and gaming technology company Playtech. Medical technology company Lifeline Scientific reports full-year results and self-storage company Lok'nStore Group reports half-year results.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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