HSBC (LSE:HSBA) fell 2.0% on Tuesday and, because of its size, took more points off the FTSE 100 than any other stock as banks retreated two days before the Bank of England's rate decision.

A 2.0% fall is not unusual for a share on a weak day. On Tuesday 3 November, several FTSE 100 stocks fell further. Yet HSBC (LSE:HSBA) was identified by both Reuters and ad-hoc-news as the biggest approximate drag on the Blue-Chip index in points terms. The explanation lies less in the size of its move than in the size of the company.

The FTSE 100 closed at 10,638.43, down 122.90 points or 1.14% from Monday's 10,761.33. That was its steepest one-day fall in a month and ended a four-session winning streak. Banks and miners did most of the damage. The FTSE 350 banks index dropped 1.6%, while the FTSE 350 basic resources index slid 2.6% as copper hit a multiweek low.

Why size matters in an index

The FTSE 100 is weighted by market value. In simple terms, the bigger a company's stock market valuation, the more influence its share price has on the index level. A small constituent can fall sharply and barely dent the headline number, while a heavyweight can move the whole index with a comparatively modest change.

For illustration, imagine a hypothetical index standing at 1,000 points in which one company accounts for 10% of the total value. If that company's shares fall 2%, the index loses about 2 points from that stock alone (1,000 × 10% × 2% = 2). Now imagine a much smaller member making up 1% of the index that falls 4%. Its contribution would be about 0.4 points (1,000 × 1% × 4% = 0.4). The smaller company fell twice as far, yet the larger one did five times as much damage to the index.

That is the mechanism behind Tuesday's headline. The fact sheet used for this article does not provide HSBC's exact index weighting or its precise points contribution, so no figure is given here. But the ranking itself, as the largest approximate drag, reflects the bank's heavyweight status among FTSE 100 constituents. By comparison, Antofagasta (LSE:ANTO) fell 3.5% and Glencore (LSE:GLEN) lost 2.8%, larger percentage moves that did not take the top spot in points terms.

Banks and the Thursday rate decision

HSBC was not acting alone. The FTSE 350 banks index fell 1.6% ahead of the Bank of England's Monetary Policy Committee announcement on Thursday 5 November. A 25 basis point increase, from 3.75% to 4%, is widely expected. It would be the first rise since August 2023.

Interest rates matter to banks in several ways. In general terms, higher rates can widen the gap between what lenders earn on loans and what they pay on deposits, which can support income. But higher borrowing costs can also squeeze households and businesses, potentially raising the risk of Bad Debts and dampening Demand for new loans. Which effect dominates depends on many factors, and markets often become nervous in the run-up to a decision when the path beyond it is uncertain.

That uncertainty was on display. Money markets have fully priced four 25bp increases by next September, according to LSEG data cited by Reuters. ING, which expects a follow-up rise in February, regards market pricing for a longer run of hikes as overdone, while also arguing that "the worsening energy crisis has made it much harder for the Bank not to act." Alessia Berardi, head of global Macroeconomics at Amundi Investment Institute, said the market was pricing a full hiking cycle, adding: "we think that one or two moves will be enough..."

Those differing views help explain why bank shares might wobble before a decision. If the path of rates is unclear, so too is the outlook for lending margins and Credit quality. Investors may also choose to reduce exposure before a known event and wait for clarity, a pattern that can weigh on a whole sector without any company-specific news. The sources used here give no HSBC-specific announcement on Tuesday, so the bank's fall is best read in that sector-wide context.

Inflation, oil and a global backdrop

The rate debate is being shaped by energy. Reuters noted that elevated oil prices have fuelled Inflation fears and that many central banks have raised rates. Crude slid about 2% on Tuesday in volatile trade after falling roughly 7% on Monday, as investors weighed talks aimed at ending the wars in Ukraine and Iran. Brent settled on Monday at $104.77 a barrel.

HSBC's Business stretches well beyond the UK, which means its shares also respond to global conditions. Tuesday was the day of the US midterm elections, with all 435 House seats and 35 Senate seats contested. Reuters said a Democratic showing was described as priced in; Sterling stood at about $1.3417 on Monday 2 November.

The selling deepened through the day. The FTSE 100 was at about 10,705 early in the morning and around 10,687.72 at midday, then lost a further 49.29 points to finish at 10,638.43. The FTSE 250, which has fewer large banks and global miners, fell a milder 0.5% to 24,674.91.

Key dates to watch

Wed 4 Nov:Eurozone inflation figures, expected at 3.9%.

Thu 5 Nov:Bank of England MPC decision; a 25bp rise to 4% is widely expected.

Fri 6 Nov:US October jobs report, relevant for dollar earners.

Thu 12 Nov:ONS first quarterly GDP estimate for July–September 2026, at 7:00am.

Tue 1 Dec:FTSE Russell December review market-cap data cut-off.

The bottom line

HSBC's 2.0% fall on Tuesday was modest in percentage terms, but its weight in the FTSE 100 made it the biggest approximate drag on the index. The move came as the banking sector lost 1.6% ahead of a widely expected rate rise, with markets debating how far the Bank of England will ultimately go. Index mechanics explain why a heavyweight can outweigh sharper falls elsewhere, and Thursday's decision, along with the commentary that comes with it, will shape how bank shares and the wider index settle in the days ahead.