Stocks in Europe ended markedly higher on Wednesday, amid a growing conviction that a crisis in the banking sector is being contained.
The FTSE 100 index jumped 80.02 points, 1.1%, at 7,564.27. The FTSE 250 surged 236.12 points, 1.3%, to 18,632.81. The AIM All-Share climbed 3.75 points higher, 0.5%, at 796.20.
The Cboe UK 100 ended up 0.9% at 755.36, the Cboe UK 250 added 1.5% at 16,235.83, and the Cboe Small Companies rose 0.4% to 13,251.01.
In European equities on Wednesday, the CAC 40 in Paris surged 1.4%, while the DAX 40 in Frankfurt jumped 1.2%.
London’s FTSE 100 has risen over 2.0% so far this week, a far cry from the turmoil financial markets suffered amid fears of a banking crisis contagion.
In a strong day for banking stocks, Barclays closed up 3.4%, among the best FTSE 100 performers. The good feeling also stretched to the insurance sector. Asia-focused Prudential surged 4.4%. Elsewhere, M&G climbed 4.2%, also among the FTSE 100’s best-performers.
In Zurich, UBS shares rose 3.7%. It turned to its former chief executive officer, following its takeover of Credit Suisse. Sergio Ermotti, currently chair of reinsurer Swiss Re, will retake the helm of the Swiss bank next month.
Ermotti was previously CEO of UBS from late 2011 to October 2020, during which time he ‘successfully repositioned UBS following the severe challenges arising from the global financial crisis’, the bank asserted.
Incumbent UBS CEO Ralph Hamers has ‘agreed to step down to serve the interests of the new combination, the Swiss financial sector and the country’, UBS said.
Alibaba on Tuesday said it will split its company into six business groups, each with the ability to raise outside funding and go public, the most significant reorganization in the Chinese e-commerce firm’s history. Its shares rose 12% in Hong Kong on Wednesday.
Investors saw thus as a sign of confidence in the global equity market.
AJ Bell analyst Russ Mould commented: ‘Often corporate reshuffles act as a catalyst for the share price on the basis that the individual parts of the business are worth more than the whole company. Breaking up the business could unlock this hidden value. As overhauls go this is about as dramatic as you could get and follows damaging crackdowns on the company and the wider sector by the Chinese authorities. It looks like Alibaba is seeking to assuage Beijing‘??s concerns about monopolistic behaviour.
‘It is also worth noting that Alibaba’s e-commerce arm is the most profitable part of the business. Its top Chinese online marketplaces, Taobao and Tmall, do not take on any inventories. Instead, they act as paid listing platforms that link buyers to sellers, with its logistics unit Cainiao fulfilling orders. This keeps the amount of money it has tied up in the business low and supports strong margins. Allowing the core commerce operations to stand alone rather than subsidising other growth ventures, in areas like cloud computing, digital media, entertainment and technological innovation, could enable it to achieve a higher price tag on the market.’
The pound was quoted at $1.2326 late Wednesday afternoon UK time, down from $1.2339 at the London equities close on Tuesday. The euro traded at $1.0834, down from $1.0839. Against the yen, the dollar climbed to JP¥132.51 up from JP¥130.98.
Back among London listings, Next fell 4.6%. The clothing and homewares retailer failed to raise cautious annual guidance, disappointing the market.
Next still expects full price sales to decline 1.5% in the year to January 2024. Pretax profit is to decline 8.5% to £795 million. For the year just gone, pretax profit edged up 5.7% to £869.3 million from £823.1 million. This topped Next’s guidance of £860 million.
Elsewhere in London, tinyBuild jumped 9.9%. The indie video games publisher said 2022 pretax profit was $15.9 million, up 27% from $12.5 million in 2021, with revenue increasing 21% to £63.3 million from £52.2 million.
Looking ahead, tinyBuild said its pipeline for 2023 and beyond is strong, including a number of larger budget games alongside continued investment in the catalogue, including updates, downloadable content and console launches.
Stocks in New York were higher at the time of the London equities close. The Dow Jones Industrial Average was up 0.6%, the S&P 500 added 0.9%, while the Nasdaq Composite surged 1.2%.
lululemon jumped 13%. For the financial year that ended January 29, the athletic apparel retailer reported revenue of $2.77 billion, up from $2.13 billion.
‘Heading into the print, investors seemed worried elevated inventory levels and lululemon’s recent gross margin percentage misses were signs the company’s growth rate was poised to decelerate. The key learning for us from lululemon’s fourth quarter report is those worries appear overdone,’ analysts at UBS commented.
US regulators charged with overseeing Silicon Valley Bank before its collapse this month said Wednesday that they shared in the blame for its rapid failure, after it took excessive interest-rate risk.
‘I think that any time you have a bank failure like this, bank management clearly failed, supervisors failed and our regulatory system failed,’ the Federal Reserve’s vice chair for supervision Michael Barr told the House Financial Services Committee.
‘I think we as the regulators of the institution had responsibility,’ Federal Deposit Insurance Corporation chair Martin Gruenberg said during the hearing, while also blaming SVB’s management for its failure.
Barr, Gruenberg and Treasury under secretary for domestic finance Nellie Liang were on Capitol Hill for their second day of Congressional hearings on the dramatic failure of the Californian lender.
Gold was quoted at $1,967.03 an ounce late Wednesday afternoon, largely flat from $1,967.14 on Tuesday. Brent oil was trading at $78.37 a barrel, up slightly from $78.09
Thursday’s economic calendar has a German inflation reading at 1300 BST, before US gross domestic product data at 1330 BST.
Thursday’s local corporate calendar has a trading statement from greeting cards and gifting firm Moonpig and annual results from North Sea oil and gas operator Ithaca Energy.
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