HSBC share price has been in the red since Thursday as markets digest the latest interest rate hike by the Bank of England. The British banking stock has slipped by more than 2% in the past 24 hours but remains 16% higher in the year to date. At press time, the HSBA stock price was trading slightly lower at 602p.
Fight Against Inflation
Most European stocks are set to end the week lower as markets chew on the latest rate-hike campaign by global central banks. UK’s FTSE 100 index inched lower on Friday, building on losses made on Thursday. Banking stocks, including NatWest, Lloyds, Barclays, and HSBC, have been among the laggards in the UK’s premier index.
The Bank of England (BoE) announced a 0.5 basis point hike to 5% in interest rates on Thursday, the highest level since 2008 and the largest increase since February. The surprise move by the UK central bank was ahead of analysts’ expectations of a 0.25% increase to 4.75%. The bank’s move came in after UK’s Consumer Price Index (CPI) reading for May came in higher than expected. Voting 7-2 in favor of the interest rate hike, the Monetary Policy Committee (MPC) said that it was responding to the latest data that indicated stronger inflationary pressures.
BoE Governor, Andrew Bailey, stated that the central bank was on the front foot in the fight against persistently high inflation. UK’s Prime Minister, Rishi Sunak, signaled his support for the decision by the BoE and promised to keep a firm grip on fiscal policy to control inflation. Chancellor Jeremy Hunt also showed his support for the BoE’s decision, stating that the government would continue to align its fiscal policy to fight inflation.
An environment of higher interest rates tends to be bittersweet for banking stocks, especially major banks. Higher interest rates usually mean banks get to receive higher net interest incomes. Conversely, there is always the risk of increased bad loans which would affect the bank’s profits in the long run, explaining the drop in the HSBC share price.
HSBC Share Price Analysis
The daily chart shows that the HSBC share price has been struggling to recover for the past few weeks amid macroeconomic uncertainties. The HSBA stock price is moving below and above the 25-day and 50-day moving averages, respectively. It is also moving above the 50-day and 200-day exponential moving averages.
Therefore, the HSBC share price is likely to fall further in the ensuing sessions before embarking on its recovery journey. More downswings will have the sellers eyeing the next support level at 582p. However, a move above the bullish support zone of 614p will invalidate the bearish thesis.