BUSINESS LIVE: Inflation hits 3%; HSBC to slash costs; BAE Systems profits soar

Mark Crouch, market analyst at eToro:

‘BAE Systems expects sales to surpass £30bn this year, as substantial contract wins in 2024 have seen the defense giant’s order book grow to record levels. Demand for military equipment—ranging from submarines and combat vehicles to fighter jets and naval frigates—continues to rise as nations worldwide look to bolster their defense capabilities.

‘BAE shares received a further boost this week following remarks by US Vice President JD Vance at the Munich Security Conference. In a speech that rocked a few boats, Vance seemed to question European countries’ commitment to defense, asserting that they will need to invest more, with the United States seemingly unwilling to bear the lion’s share of Europe’s defense burden moving forward.

‘With the UK and other European nations now in the precarious position of needing to rapidly resupply their military forces, defense contractors like BAE—Europe’s largest defense company—will play a key role in filling that gap. And in countries like the UK, where armed forces are now roughly 20% smaller than they were a decade ago, this gap presents a significant opportunity for defense giants like BAE to step in.’

HSBC is set to shed even more jobs as part of sweeping cost-cutting plans, as the lender undergoes a transformation guided by new boss Georges Elhedery.

Britain’s biggest bank told shareholders on Wednesday it expects to incur around £1.4billion in severance and other up-front costs over the next two years.

HSBC has not detailed how many employees will be affected by its new targets, but said it was expecting to reduce staff expenses by 8 per cent as a result its cost-cutting drive.

Richard Hunter, head of markets at Interactive Investor:

‘Overall, these are comforting numbers which leave HSBC a strong springboard on which to build as the business is reorganised.

‘The longer-term potential for the Asian markets has been something of a blessing and a curse of late, with a faltering Chinese economy being something of a headwind more recently.

‘HSBC shares have nonetheless risen by 41% over the last year, as compared to a gain of 13% for the wider FTSE100 and over the last three years the signals have been strong, with a 65% increase in the price.

‘The likes of HSBC already have an established and trusted brand in the Asian region which by definition provides an advantage, and the reorganisation should open the door to further growth.

‘In the meantime, the group will need to work even harder to justify its premium rating among the banks, especially given its eye on the future, which is reflected by a current market consensus of the shares as a hold, albeit a strong one.’

Shares in the US-based owner of Boots soared on talks of a takeover by private equity –raising fresh questions over the High Street pharmacy’s future.

New York-listed Walgreens Boots Alliance, which owns the chain, as well as US group Walgreens, surged 11 per cent following a report that discussions were ‘alive’ with buyout group Sycamore Partners.

The two firms have reportedly been discussing a takeover deal which could be completed early this year.

James Smith, developed markets economist, UK, at ING:

‘Energy and food are of little relevance to the BoE’s decision-making. What really matters is service sector inflation, and here the news is getting better. Admittedly services CPI did rebound up to 5%, though that was lower than expected and followed an artificially low reading in December. Airfares didn’t properly account for the usual surge in…