London close: Stocks drop as banking sentiment falls again

By Josh White

London’s stock market closed in negative territory on Thursday, as initial relief over the rescue of US bank First Republic faded, and Credit Suisse faced further troubles.
The FTSE 100 was down 1.01% to 7,335.40 and the FTSE 250 declined 1.53% to 18,470.83.

On Thursday, 11 major US banks deposited $30bn with First Republic Bank, in a bid to show their support and maintain confidence in the country’s banking system.

The banks involved included Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, BNY Mellon, PNC Bank, State Street, Truist, and US Bank.

In a joint statement, the banks emphasised the importance of supporting smaller- and medium-sized banks, which create millions of jobs and contribute to the local economy.

However, the positive sentiment was short-lived as Credit Suisse shares continued to slide following news of a lawsuit filed against the bank by the Rosen Law Firm.

The lawsuit alleged that Credit Suisse made “materially false and misleading statements” in its 2021 annual report, thereby overstating its financial prospects to shareholders.

“Hopes that the banking crisis would continue to fade have themselves grown weaker, as stocks fell again, reversing much of yesterday’s move higher,” said IG chief market analyst Chris Beauchamp.

“Credit Suisse continues to be the bugbear for Europe, while in the US First Republic worries are still the main driver of losses.

“This week has been a liquidity crisis, but it seems that the moves by authorities to remedy the situation have not completely reassured wary investors.”

In currency markets, sterling gained 0.55% against the dollar to last trade at $1.2176, while it was nearly flat against the euro, declining a marginal 0.01% to €1.1413.

UK economy alone in G7 on predicted economic contraction

In economic news, the OECD projected that the UK economy would contract by 0.2% in 2023, making it the only industrialised nation besides Russia to experience negative growth this year.

The revised estimate was an improvement from the previous forecast of a 0.4% contraction, but it still ranked the UK last among the G7 countries.

The OECD said it anticipated a “mild rebound” in 2024, with growth of 0.9%.

Comparatively, the US and Japan were projected to grow by 1.5% and 1.4% this year, while Germany was expected to see a 0.3% growth.

Russia’s economy was expected to contract by 2.5%.

In the eurozone, meanwhile, annual inflation slightly decreased to 8.5% in February, down from 8.6% in January.

While energy inflation decreased, food, alcohol, and tobacco inflation increased to 15%.

Core inflation rose by 0.3 percentage points to 5.6%, according to Eurostat data.

“Today’s print lends support to yesterday’s decision of the ECB to continue tightening monetary policy despite the ongoing turbulence in financial markets,” noted analysts at Oxford Economics.

“Although we do not think that the council will fully sidestep the issue of the impact of higher rates on financial stability, it is more likely to use liquidity measures to address this risk.

“Hence, we see little chance of a meaningful pivot before there are clear signs of core inflation abating.”

Across the pond, US industrial output remained stagnant in February due to weakness in the mining sector.

The US Department of Commerce reported a 0.6% decline in mining production, while manufacturing and utilities increased by 0.1% and 0.5%, respectively.

Year-on-year, manufacturing output fell by 1.0%.

Still stateside, the University of Michigan’s preliminary consumer confidence index for March revealed growing pessimism among Americans, primarily due to persistently high prices.

The index dropped from 67.0 in February to 63.4 in early March, contrary to expectations for it to remain unchanged.

Finally, the People’s Bank of China announced a 25-basis point reduction in the reserve requirement ratio (RRR) for all banks, excluding those with a 5% ratio, effective from 27 March.

The decision, aimed at boosting liquidity in the banking sector, marked the first RRR cut of the year and came earlier than anticipated, following a similar cut in December.

The central bank said it was intended to support the economy through precise and forceful policies, ensuring sufficient liquidity and reduced funding costs for businesses.

Bodycote surges as some miners hold on to gains

On London’s equity markets, select mining companies retained their gains, with Anglo American and Glencore seeing increases of 1.01% and 2.23%, respectively, following an earlier surge in metal prices.

Bodycote shares jumped 5.85% after the company reported a significant increase in full-year profit and revenue, as well as an enhanced dividend.

The firm said permanent price increases had fully offset labour and general cost inflation.

Diploma’s stock value rose by 3.19% after the company raised around £235m in a placing to help fund the acquisition of US-based Tennessee Industrial Electronics.

Pharmaceutical company GSK saw a 0.99% increase after an upgrade to ‘buy’ from ‘hold’ by Deutsche Bank, while the London Stock Exchange Group had a 1.97% boost after an upgrade to ‘buy’ at UBS.

On the downside, BT Group’s stock dropped 6.07% as its Openreach business announced it would postpone the launch of its Equinox 2 pricing deal.

The decision followed a two-month delay by Ofcom in concluding its investigation into a new Openreach broadband pricing plan.

Finally, Sage Group’s shares fell 2.6% after a downgrade to ‘neutral’ at Exane.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,335.40 -1.01%
FTSE 250 (MCX) 18,470.83 -1.53%
techMARK (TASX) 4,457.64 -1.31%

FTSE 100 – Risers

Endeavour Mining (EDV) 1,760.00p 2.44%
Glencore (GLEN) 432.65p 2.23%
London Stock Exchange Group (LSEG) 7,470.00p 1.97%
Fresnillo (FRES) 710.00p 1.75%
Imperial Brands (IMB) 1,884.50p 1.18%
Anglo American (AAL) 2,504.00p 1.01%
GSK (GSK) 1,400.80p 0.99%
Compass Group (CPG) 1,941.00p 0.75%
Shell (SHEL) 2,214.00p 0.23%
DCC (CDI) (DCC) 4,290.00p 0.05%

FTSE 100 – Fallers

BT Group (BT.A) 137.75p -6.07%
Abrdn (ABDN) 199.30p -5.55%
Hiscox Limited (DI) (HSX) 1,042.00p -4.84%
Ocado Group (OCDO) 416.10p -4.48%
Rolls-Royce Holdings (RR.) 140.30p -4.10%
Prudential (PRU) 1,008.00p -3.95%
Smurfit Kappa Group (CDI) (SKG) 2,827.00p -3.52%
Legal & General Group (LGEN) 226.60p -3.33%
Melrose Industries (MRO) 147.30p -3.19%
Aviva (AV.) 402.20p -3.08%

FTSE 250 – Risers

Bodycote (BOY) 615.50p 5.85%
W.A.G Payment Solutions (WPS) 82.40p 4.82%
Diploma (DPLM) 2,720.00p 3.19%
Marshalls (MSLH) 310.80p 2.98%
Herald Investment Trust (HRI) 1,786.00p 2.88%
Auction Technology Group (ATG) 646.00p 2.54%
Baltic Classifieds Group (BCG) 155.00p 2.51%
TP Icap Group (TCAP) 171.00p 2.46%
Diversified Energy Company (DEC) 93.00p 2.37%
Genuit Group (GEN) 271.00p 1.88%

FTSE 250 – Fallers

Bridgepoint Group (Reg S) (BPT) 193.70p -10.07%
Currys (CURY) 59.25p -8.78%
888 Holdings (DI) (888) 58.85p -8.05%
TI Fluid Systems (TIFS) 93.60p -7.51%
ASOS (ASC) 737.50p -7.47%
Moonpig Group (MOON) 108.10p -7.37%
Shaftesbury Capital (SHC) 111.00p -7.04%
OSB Group (OSB) 489.60p -5.85%
Intermediate Capital Group (ICP) 1,154.00p -5.82%
TUI AG Reg Shs (DI) (TUI) 1,387.50p -5.68%

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