Sterling traded at a nine-month high on Tuesday, while stocks in London closed in the red amid market caution around the recent banking instability in the US and Europe.
The FTSE 100 index closed down 38.48 points, or 0.5%, at 7,634.52 on Tuesday. The FTSE 250 ended down 64.37 points, or 0.3%, at 18,815.04. The AIM All-Share closed down 3.17 points, or 0.4%, at 810.22.
The Cboe UK 100 ended down 0.4% at 764.05, the Cboe UK 250 closed down 0.3% at 16,435.40, and the Cboe Small Companies ended down 0.4% at 13,351.97.
The International Monetary Fund said the recent banking turmoil in the US and Europe could spread to crucial non-bank institutions like pension funds, further complicating central banks’ fight against high inflation.
Banking risks ‘could intensify in coming months amid the continued tightening of monetary policy globally,’ and spread to the interconnected non-bank sector, which now holds almost half of all global financial assets, IMF economists wrote in a blog post.
JPMorgan Chase Chief Executive Jamie Dimon said that while the current banking crisis isn’t like 2008, it ‘is not yet over’ and will be felt for years to come.
Dimon, who has in coordination with Washington officials shaped the financial industry’s response to the crisis, said recent bank failures ‘have significantly changed the market’s expectations ... the stock market is down and the market’s odds of a recession have increased,’ he wrote in his annual shareholder letter.
‘And while this is nothing like 2008, it is not clear when this current crisis will end.’
ING analyst Chris Turner commented that recent developments have meant a ‘US hard landing and a sharp Fed easing cycle more likely’ which he said was a ‘cleanly bearish story for the dollar.’
The pound was quoted at $1.2501 at the London equities close on Tuesday, up sharply from $1.2386 at the close on Monday.
The pound reached an intraday high of $1.2524, its best level since June last year.
In the FTSE 100, miner Fresnillo was the best blue-chip performer at the close, up 3.8%, as gold topped the $2,000 mark.
Gold was quoted at $2,016.62 an ounce at the close on Tuesday, significantly higher against $1,988.83 at the same time on Monday.
Haleon was one of the top performers, closing up 2.3%, after Bernstein started the pharmaceutical firm with ’outperform’ and a price target of 380 pence.
Glencore rose 2.1%, reversing Monday’s losses.
On Monday, New York-listed Teck Resources said that it had received and its board unanimously rejected an ‘unsolicited and opportunistic’ acquisition proposal from Glencore.
Glencore offered 7.78 of its own shares for each Teck Class B subordinate voting share, and 12.73 shares for each Teck Class A common share. This represented a 20% premium for both on the date of the offer.
Glencore said the merged company would have an estimated post-tax synergy value of between $4.25 billion and $5.25 billion.
Danni Hewson, head of financial analysis at AJ Bell, said the prospect of ‘mega deals’ in the mining space has got investors ‘excited’ and brought a ‘new lease of life’ to the sector.
Mining shares had suffered amid fears of an economic downturn.
In the FTSE 250, Rathbones rose 1.3% after the firm agreed an all-share merger with Investec Wealth & Investment to create one of the UK’s leading wealth manager.
Investec W&I UK includes Investec’s wealth and investment businesses in the UK and Channel Islands but excludes Investec Bank and Investec Wealth & Investment International, both of which will remain wholly-owned subsidiaries of Investec.
The merger will create a UK wealth manager with around £100 billion of funds under management and administration, the two companies said.
The enlarged Rathbones will remain an independent premium-listed company in London operating under the Rathbones brand with Investec as a long-term, strategic shareholder.
Elsewhere in London, Saga plunged 16% as the over-50s travel operator suffered a widened annual loss due to an impairment charge on its insurance business.
The Kent-based firm said revenue in the financial year that ended January 31 grew by 54% to £581.1 million from £377.2 million the year before, due to increased trading in the Cruise and Travel businesses following the lifting of Covid travel restrictions.
It swung to an underlying pretax profit of £21.5 million, from a loss of £6.7 million. However, Saga’s statutory pretax loss widened to £254.2 million from £23.5 million the year before, reflecting an impairment of insurance goodwill of £269.0 million.
In European equities on Tuesday, the CAC 40 in Paris ended marginally lower, while the DAX 40 in Frankfurt ended 0.1% higher.
The euro stood at 1.0957 at the European equities close on Tuesday, higher against $1.0883 at the same time on Monday. Against the yen, the dollar was trading at JP¥131.83, lower compared to JP¥132.32 late Monday.
Stocks in New York were lower at the London equities close, with the Dow Jones Industrial Average down 0.6%, the S&P 500 index down 0.6%, and the Nasdaq Composite down 0.5%.
The number of job opening in the US fell more than expected in February, according to the latest data from the US Bureau of Labor Statistics.
On the last business day of February, the number of job openings fell 632,000 to 9.9 million, from 10.6 million in January.
Markets had expected the number of job opening to dip to 10.4 million in February, according to FXStreet.
Oil prices held above the $84 a barrel mark following yesterday’s shock production cut from Opec+.
Brent oil was quoted at $84.16 a barrel at the London equities close Tuesday, down slightly from $84.52 late Monday,
In Wednesday’s UK corporate calendar, there are trading statements from industrial and electronics products distributor, RS Group and tiler retailer Topps Tiles. Food packaging business Hilton Food reports annual results.
In the economic calendar, financial markets in Hong Kong and Shanghai will be closed for Tomb Sweeping Day. There will also be a slew of service PMI prints, including the EU, UK and US.
Copyright 2023 Alliance News Ltd. All Rights Reserved.
