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London open: FTSE gains as attention shifts to rate decisions
London stocks rose in early trade on Tuesday as investors mulled the latest UK borrowing figures and turned their attention to upcoming rate decisions from the Federal Reserve, Bank of England and Swiss National Bank.
At 0830 GMT, the FTSE 100 was up 0.8% at 7,461.09.
Lukman Otunuga, senior research analyst at FXTM, said that although the latest developments – the acquisition of Credit Suisse by UBS – have lifted sentiment, “the overall mood remains fragile with investors likely to remain guarded ahead of the Fed meeting tomorrow”.
“We expect financial markets to remain volatile and highly sensitive to any fresh news concerning the global banking sector,” he said.
“With fears over the crisis easing, we could see a modest return in risk appetite, lending support to global stocks. Shifting our focus elsewhere, this will be a big week for markets with the US Federal Reserve (Fed), Bank of England (BoE), and Swiss National Bank (SNB) policy meetings in focus. It will be interesting to see what the SNB has to say about the Credit Suisse developments, especially after the historic takeover.”
On home shores, figures released earlier by the Office for National Statistics showed that government borrowing hit a record high for February due to the energy support scheme.
Public sector net borrowing came in at £16.7bn, up from £7.1bn in February 2022 and above consensus expectations of £11.4bn. It marked the highest level for the month of February since records began in 1993.
However, the data also showed that debt interest payments fell by £1.3bn on the year to £6.9bn.
Ruth Gregory, deputy chief UK economist at Capital Economics, said: “The news on the public finances may have raised the Chancellor’s hopes that he will be able to announce a pre-election giveaway later this year.
“But the big risk is that a further escalation in the banking crisis causes a deterioration in the fiscal outlook as the hit to the public finances from weaker economic growth is only partially cushioned by lower gilt yields.”
In equity markets, banks were in the black, recovering some poise after recent turmoil in the sector sent shares tumbling. Barclays, NatWest and Lloyds were all higher.
B&Q and Screwfix owner Kingfisher also gained as it posted a drop in full-year profit – in line with its guidance – as sales dipped, with trade normalising after the pandemic boost. In the year to the end of January 2023, adjusted pre-tax profit fell 20.2% to £758m, with sales down 0.9% to £13.1bn. The company had guided to pre-tax profit of £730m to £760m.
Educational publisher Pearson ticked a touch higher after saying it was selling its Online Learning Services (POLS) operation to private equity firm Regent for a deferred sum as part of a strategic review of its business.
In broker note action, TI Fluid Systems was lifted to ‘hold’ at Jefferies, while InterContinental Hotels was cut to ‘sell’ at Redburn.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Barclays Plc | +4.97% | +6.78 | 143.14 |
| 2 |  |
Prudential Plc | +4.30% | +43.50 | 1,056.00 |
| 3 |  |
Ashtead Group Plc | +4.07% | +198.00 | 5,064.00 |
| 4 |  |
Lloyds Banking Group Plc | +4.00% | +1.85 | 47.95 |
| 5 |  |
Standard Chartered Plc | +3.90% | +24.00 | 639.00 |
| 6 |  |
Rolls-royce Holdings Plc | +3.82% | +5.38 | 146.36 |
| 7 |  |
Legal & General Group Plc | +3.47% | +8.00 | 238.50 |
| 8 |  |
Bp Plc | +3.41% | +16.60 | 503.60 |
| 9 |  |
Sainsbury (j) Plc | +3.26% | +8.20 | 260.00 |
| 10 |  |
Itv Plc | +3.25% | +2.60 | 82.66 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo Plc | -2.12% | -15.80 | 728.20 |
| 2 |  |
National Grid Plc | -1.14% | -12.00 | 1,042.00 |
| 3 |  |
United Utilities Group Plc | -1.09% | -11.50 | 1,045.00 |
| 4 |  |
Severn Trent Plc | -1.09% | -31.00 | 2,818.00 |
| 5 |  |
Vodafone Group Plc | -0.83% | -0.77 | 91.70 |
| 6 |  |
Croda International Plc | -0.59% | -38.00 | 6,390.00 |
| 7 |  |
Kingfisher Plc | -0.55% | -1.50 | 271.80 |
| 8 |  |
Coca-cola Hbc Ag | -0.42% | -9.00 | 2,137.00 |
| 9 |  |
Sage Group Plc | -0.25% | -1.80 | 730.40 |
| 10 |  |
Segro Plc | -0.16% | -1.20 | 752.00 |
US close: Stocks higher as banks continue to drive markets
Wall Street stocks closed higher on Monday as the current state of the global banking system remained firmly in focus.
At the close, the Dow Jones Industrial Average was up 1.20% at 32,244.58, while the S&P 500 advanced 0.89% to 3,951.57 and the Nasdaq Composite saw out the session 0.39% lower at 11,675.54.
The Dow closed 382.60 points higher on Monday, reversing losses recorded in the previous session as the banking sector weighed on major indices.
Banks continued to drive markets on Monday after the Swiss government engineered a forced CHF 3.0bn (£2.64bn) takeover of Credit Suisse by UBS, yet another attempt by policymakers to stop a crisis threatening the banking sector.
Regional banks were still drawing an amount of investor attention amid calls to shore up their deposit bases following the shuttering of Silicon Valley Bank earlier in March, with analysts expecting that more actions will likely be needed if the Federal Reserve can restore confidence in the banking system after it backstopped SVB’s uninsured deposits and offered new funding for troubled banks.
First Republic shares closed more than 47% lower after shedding a whopping 72% in the previous week, with further losses coming even as a consortium of banks vowed to deposit $30.0bn with the struggling San Francisco lender or at least 120 days.
Oil prices headed both ways on Monday, with Brent crude up 1.12% at $73.79 a barrel and West Texas Intermediate changing hands 0.13% softer at $67.55 per barrel, while the two and ten-year Treasury yields hit to their lowest levels in six months early in the session before jumping back to 3.991% and 3.486%, respectively.
In terms of earnings, Foot Locker smashed fourth-quarter earnings estimates of $0.51 with its $0.97 per share performance, while revenues came to $8.76bn – at the top end of consensus.
Also in corporate headlines, Amazon revealed it will lay off 9,000 more employees, according to CEO Andy Jassy, on top of previously announced layoffs that affected more than 18,000 employees.
No major data points were released on Monday.
Tuesday newspaper round-up: Unilever, Scottish Mortgage, Drax
Derby is to be named the new headquarters of Britain’s rail network by ministers this week, the Guardian understands. The delayed result of the competition to become the official home of Great British Railways is expected as early as Tuesday, with the Midlands city the frontrunner on a shortlist of six including Birmingham, Crewe, Doncaster, Newcastle and York. – Guardian
Magnum has cut the number of ice creams sold in its multipacks despite the price staying the same for shoppers. Unilever, the owner of the brand, has shrunk the size of the packs by a quarter in the latest round of shrinkflation on supermarket shelves.- Telegraph
A US-based developer of small nuclear reactors has signed a deal to sell 24 of its power plants to UK customers, putting pressure on rival makers including Rolls-Royce. Last Energy said the £100m modular units, which are two-thirds the size of a football pitch, can output 20MW of electricity, enough to power 40,000 homes. They will be deployed in 2026 with no government funding required. – Telegraph
Scottish Mortgage Investment Trust has been guilty of governance violations going back months, according to a rebel director at the centre of a board bust-up at the FTSE 100 investment company. Amar Bhide, who has been a main board director since 2020, told The Times there had been “a long series of procedural violations” that were “brushed aside” and that he intended to publish details shortly. – The Times
Drax, the owner of Britain’s biggest power station, has warned that the plant could become unviable when its subsidies run out in 2027, threatening Britain’s energy security. The FTSE 250 group said that the future of the biomass-fuelled power plant in North Yorkshire from which it took its name, which can supply four million homes, was in doubt unless it was swiftly offered new subsidies to support the development of a £2 billion carbon capture and storage (CCS) facility at the site. – The Times
