The FTSE100 edged higher, though stock prices in London remained largely in the red at midday, in the first indication of improving market sentiment after UBS’s $3.25 billion takeover of Credit Suisse.
‘In theory, there is no reason for the Credit Suisse crisis to extend, as what triggered the last quake for Credit Suisse was a confidence crisis - which doesn’t concern UBS - a bank outside of the turmoil, with, in addition, ample liquidity and guarantee from the [Swiss National Bank] and the government,’ said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
The FTSE 100 index was up 28.43 points, or 0.4%, at 7,363.83, while the FTSE 250 was down 26.86 points, or 0.2%, at 18,443.97, and the AIM All-Share was down 6.94 points, or 0.9%, at 797.09.
The Cboe UK 100 was up 0.4% at 736.63, the Cboe UK 250 was down 0.1% at 16,012.43, and the Cboe Small Companies was up 0.3% at 12,886.88.
Things were also looking brighter for European equities at midday, with the CAC 40 in Paris up 0.8%, and the DAX 40 in Frankfurt up 0.7%.
Meanwhile, stocks in New York were called flat, overall, though the S&P 500 index and the Nasdaq Composite were seen very marginally higher.
Despite nascent signs of an improved market mood, banking stocks remained the worst performers in London at midday.
HSBC was down 2.3%, NatWest fell 1.3%, Barclays lost 2.8%, Lloyds dropped 1.3%, and Standard Chartered was trading 3.4% lower.
In contrast, mining stocks remained the blue-chip index’s top performers.
Endeavour Mining, Fresnillo, Anglo American, Glencore, and Antofagasta were up 4.8%, 3.4%, 3.1%, 2.7%, and 2.3%, respectively, at midday.
Water utilities were also performing well, despite UK water services regulator Ofwat announcing new powers that will enable it to stop the payment of dividends by water utilities if they would ‘risk the company’s financial resilience’.
United Utilities added 2.3%, Severn Trent rose 2.8%, and Pennon climbed 1.5%.
Ofwat said the change will require the company board to ‘take account of their performance’ for customers and the environment when deciding to make dividend payments and will require companies to ‘maintain a higher level of overall financial health’.
Russ Mould, investment director at AJ Bell, said that so far March has been like a ‘ghost train’ for investors.
‘Every time they turn a different corner, some new horror screams in their face. Many investors now want to get off the train and that’s evident by them hiding in classic areas deemed to be market safe havens,’ he said.
‘We’re talking gold miners, utilities, consumers goods and even rat catchers, pockets of the market that offer some reassurance when everything else seems terrible.’
In the FTSE 250, Supermarket Income lost 0.5% after it reported it sold its interest in the J Sainsbury’s reversion portfolio.
The real estate investment trust received £279.3 million for the first tranche of the total £430.9 million consideration. Supermarket Income said it has used part of the proceeds to repay, in full, a £202.8 million debt facility provided by JPMorgan.
Elsewhere, Schroder European Real Estate Investment Trust fell 1.9% as it announced it bought a freehold industrial warehouse in the Netherlands for €11 million.
The purchase by the European-focused investing firm reflects a net initial yield of 5.6%. The 9,115 square metre property is fully let to WA Schuurman Beheer, an electrical engineering and renewable energy specialist.
On AIM, Tribal plunged 16% after it said Singapore’s Nanyang Technological University has decided to terminate its contract with the company and has reserved rights to claim damages.
The educational software and services provider said that it rejected NTU’s right to terminate the contract and is considering its options regarding the next appropriate steps.
Consequently, the company has revised the publication date of its annual results to March 24 to allow it time to consider the impact of the contract termination, particularly the accounting treatment of a £4.5 million onerous contract provision contained within previous expectations.
The dollar was weaker at midday. The pound was quoted at $1.2221 at midday on Monday in London, higher compared to $1.2168 at the close on Friday.
The euro stood at $1.0696, higher against $1.0665. Against the yen, the dollar was trading at JP¥130.91, lower compared to JP¥132.12.
However, Francesco Pesole at ING suggested that ‘lingering stress’ in the financial sector and ‘defensive positioning’ ahead of the Federal Open Market Committee decision on Wednesday could offer support to the dollar.
The US Federal Reserve will announce its next interest decision on Wednesday. Markets see a 67% chance of the Fed raising rates by 25 basis points and a 33% chance of rates remaining the same, according to the CME FedWatch tool.
Analysts at Brown Brothers Harriman said: ‘Simply put, we do not know the extent to which market turmoil is impacting the rate hike debate. We will know more at Chair Powell’s press conference Wednesday afternoon.
‘Our best guess is that Fed officials fall in line with [European Central Bank] President Lagarde, who last week stressed that there is no trade-off between price and financial stability. This was a very strong statement that suggests any banking sector issues won’t derail the tightening cycle. We think this view is held by pretty much every central bank, including the Fed, which supports our call for a 25 bp hike this week.’
Brent oil was quoted at $71.85 a barrel at midday in London on Monday, down from $73.43 late Friday. Gold was quoted at $1,982.72 an ounce, higher against $1,957.76.
Still to come in Monday’s economic calendar, there is a US retail trade report at 1400 GMT.
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