Stocks in London closed in the red on Friday, and ended the week sharply lower, as markets on both sides of the Atlantic remained worried about struggling banks.
‘As we approach the end of the week, it’s quite clear that the two epicentres of financial stability tumult - Credit Suisse in Europe and regional banks in the US - remain unresolved,’ said Francesco Pesole at ING.
The FTSE 100 index closed down 74.63 points, or 1.0% at 7,335.40 on Friday and finished the week down 5.3%.
The FTSE 250 ended down 287.75 points, or 1.5%, at 18,470.83, finishing the week 4.6% lower. The AIM All-Share closed down 10.04 points, or 1.2%, at 804.03, closing 3.9% lower over the past five days.
The Cboe UK 100 ended down 1.0% at 733.65, the Cboe UK 250 closed down 1.9% at 16,032.23, and the Cboe Small Companies ended down 1.1% at 12,845.04.
Bloomberg reported that UBS and Credit Suisse are both against any merger scenario, despite Credit Suisse’s recent woes.
Citing sources close to the matter, Bloomberg said UBS would prefer to focus on its own wealth-centric standalone strategy and is reluctant to take on risks related to Credit Suisse.
On Thursday, the Swiss central bank rescued Credit Suisse with a fr.50 billion, around $53.73 billion, lifeline.
UBS and Credit Suisse see a takeover as a potential measure of last resort, given the significant hurdles and overlap from such a transaction, according to Bloomberg’s sources.
In Zurich, shares in Credit Suisse closed down 8.0%, after finishing 19% higher on Thursday. Credit Suisse’s value has fallen by 21% so far this week and, over the past 12 months, the stock is down 74%.
Across the Atlantic, shares in First Republic Bank plunged 26% in New York, despite a consortium of major American banks depositing $30 billion to shore up the embattled California lender.
The news follows the closure of two other major US lenders, Silicon Valley Bank and Signature Bank, and has further added to fears around the US banking sector.
The US Federal Reserve has lent US banks nearly $12 billion under a new one-year lending program unveiled Sunday, as authorities moved to ease stress on the financial system.
The total outstanding amount of all advances under the Bank Term Funding Program reached $11.9 billion by Wednesday, the US central bank announced in a statement on Thursday.
Russ Mould, investment director at AJ Bell, said whether the efforts on the part of the Swiss government to prop up Credit Suisse prove sufficient, or whether Wall Street’s injection into troubled regional institution First Republic overnight works, the ‘dreaded c-word’ - contagion - ‘certainly remains in the air.’
The pound was quoted at $1.2168 at the London equities close on Friday, up from $1.2110 at the close on Thursday.
ING’s Pesole said that markets probably deem the UK banking sector as ‘less exposed’ than the eurozone one and are thus ‘punishing the euro much more than the pound’ when risks to the Swiss lender escalate.
Nonetheless, banks in London were largely in the red at the close on Friday. HSBC, NatWest, Lloyds, Barclays, and Standard Chartered were down 2.9%, 1.4%, 2.6%, 2.0%, and 2.5%, respectively.
Elsewhere in the FTSE 100, BT was the blue-chip index’s worst performer, finishing 5.6% lower as its Openreach unit’s Equinox 2 scheme faces a setback in its planned launch next month.
UK regulator Ofcom said it needs more time to consider the new pricing arrangements for the fibre-to-the-premises services.
Network cabling and wiring service provider Openreach plans to introduce a pricing plan for internet providers from April 1.
At the beginning of February, Ofcom - the UK’s regulatory competition authority for broadcast & telecommunications - had said its provisional view is that it should not intervene with Openreach’s plan.
However, the regulator on Friday contended it will need an additional two months for further analysis before issuing its final decision. As a result, it said the planned launch of Equinox 2 on April 1 ‘would not be appropriate’.
In the FTSE 250, Bodycote was the best performer, closing 5.9% higher.
The heat treatment supplier and specialist thermal processing services provider said profit and revenue rose in 2022 as it passed on inflationary pressures to its customers through permanent price increases.
Pretax profit in 2022 rose 23% to £95.3 million from £77.5 million, while revenue increased 21% to £743.6 million from £615.8 million the year prior.
On AIM, Verditek surged 26% after it announced it signed an exclusive three-year supply agreement with the Swedish company, Lindab Profil.
Verditek is a London-based solar panels producer, while Lindab Profil develops, manufactures and sells building products and roofing systems.
Under the agreement, Lindab will integrate Verditek’s panels with its roofing systems and market and sell them to its customers in Nordic and Eastern European markets.
Verditek have granted Lindab exclusivity for selling building integrated photovoltaic, incorporating its panels. This exclusivity is conditional on Lindab achieving a target volume of panels of 850,000 watts in 2023.
In European equities on Friday, the CAC 40 in Paris ended down 1.4%, while the DAX 40 in Frankfurt ended 1.3% lower.
The euro stood at $1.0665 at the European equities close on Friday, higher against $1.0619 at the same time on Thursday. Against the yen, the dollar was trading at JP¥132.12, lower compared to JP¥133.09.
Stocks in New York were in the red at the London equities close, with the Dow Jones Industrial Average down 1.1%, the S&P 500 index down 1.0%, and the Nasdaq Composite down 0.8%.
Brent oil was quoted at $73.43 a barrel at the London equities close on Friday, down from $74.21 late Thursday. Gold was quoted at $1,957.76 an ounce, sharply higher against $1,918.22.
In next week’s UK corporate calendar, there is a trading statement from Ocado Group on Tuesday and full-year results from Fevertree Drinks on Wednesday. On Friday, there are half-year results from JD Wetherspoon.
In the economic calendar, the US Federal Reserve will announce its next interest rate decision on Wednesday. The following day, the Bank of England will unveil its own decision.
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