Stock trading was calmer on Thursday, recovering some of the market value lost on Wednesday after Credit Suisse got a helping hand from the Swiss central bank, but the plans of the European Central Bank were thrown in doubt.
The ECB announces its latest interest rate decision at 1315 GMT on Thursday, with a press conference featuring President Christine Lagarde following at 1345 GMT.
It previously said it would lift rates by 50 basis points, though the fragility of the European banking sector means it may be tempted to enact a quarter-point lift, or even keep rates unchanged.
The FTSE 100 index was 65.97 points, 0.9%, higher at 7,410.42 midday Thursday. The FTSE 250 was up 63.75 points, 0.3%, at 18,689.61, but the AIM All-Share was down 1.07 points, 0.1%, at 809.33.
The FTSE 100 had been around 1.5% higher in earlier Thursday morning, while the FTSE 250 had been up 1.3%.
The Cboe UK 100 was up 0.9% at 741.43. The Cboe UK 250 was up 0.4% to 16,275.76. The Cboe Small Companies was flat at 13,538.36.
In mainland Europe, the CAC 40 in Paris was up 1.0%, while the DAX 40 in Frankfurt rose 0.3%.
Stocks in New York were called to open mostly lower. The Dow Jones Industrial Average was called down 0.5%, the S&P 500 down 0.4% and the Nasdaq Composite up 0.1%.
The pound was quoted at $1.2044 early Thursday afternoon, up slightly from $1.2030 late Wednesday. The euro stood at $1.0610, up from $1.0538. Against the yen, the dollar was trading at JP¥132.73, higher against JP¥132.43.
‘The next test for the markets will be the ECB’s interest rate decision later today. It seems unthinkable that it would go for an aggressive 50 basis point hike given the nervousness around the banking system. Opting for a 25 basis point hike would show that it is still on a path to try to bring down inflation but also conscious of the fragility around the financial sector that’s caused so much nervousness around the world,’ AJ Bell investment director Russ Mould commented.
‘If it went down this path, it would in effect be doing a dress rehearsal for the Federal Reserve next week. The prospect of a 50 basis point hike from the Fed now seems unthinkable. Equally, being overly cautious might send another worrying message.’
Stephen Innes, managing partner of SPI Asset Management agreed. ‘The ECB meeting is huge!!!!,’ he wrote.
‘Today, the ECB will be the first major central bank to meet since financial stability concerns escalated and could be a foreshadowing of the Fed. While many prominent house economists maintain their baseline for a 50bp, many traders think a pause is more likely than a 25bp hike.
‘Compared to most policy decision days, central banks now have a larger relevant information set than investors. While macro data is equally available for central banks and market participants, central banks have better visibility into micro bank side data, which matters most currently.’
Elsewhere on Thursday, the weekly US initial jobless claims report is released at 1230 GMT.
Shares in Credit Suisse recovered 22% on Thursday, having fallen by about the same amount on Wednesday. In the early morning hours, it announced that it will borrow almost $54 billion from the Swiss central bank.
The Swiss government will hold a special meeting on Thursday to discuss the situation at Credit Suisse.
The turbulence around the troubled Swiss lender and wealth manager spurred the seven-member Federal Council to schedule a special meeting a day ahead of its next regular gathering on Friday, the Swiss news agency ATS reported, citing sources close to the government.
Credit Suisse is one of 30 ’global systemically important banks’ considered to be so important to the financial system that they cannot be allowed to go bust.
Analysts at JPMorgan said a takeover by Swiss peer UBS could be among the options for embattled Credit Suisse. UBS shares rose 3.0% on Thursday, having slid 8.7% on Wednesday.
In London, Lloyds Bank rose 2.5% and Barclays rose 1.9%.
OSB, another lender, surged 8.2% as it posted earnings growth and declared a special dividend and share buyback.
The company, previously known as OneSavings Bank, said net interest income in 2022 climbed 21% to £709.9 million from £587.6 million. Pretax profit improved 14% to £531.5 million from £464.6 million.
Boosted by rising interest rates, its net interest margin expanded to 2.78% from 2.53%.
OSB announced a final dividend of 21.8 pence per share, up 3.3% from 21.1p a year earlier. In addition, it declared an 11.7p special dividend. Including its interim payout, it meant its total dividend grew 62% to 42.2p from 26.0p.
OSB, like some of its large-cap peers, also announced a share buyback with its annual results. It will repurchase £150 million worth of stock between now and this time next year.
Among London-listed large-caps, Rentokil surged 6.9%. In addition to reporting annual revenue growth, the pest control and hygiene company lauded early progress in integrating its Terminix acquisition.
Rentokil said revenue in 2022 jumped 26% to £3.71 billion from £2.96 billion. Pretax profit, however, fell 9.1% to £296 million from £325 million, amid a 29% rise in operating expenses to £3.37 billion.
Chief Executive Andy Ransom said: ‘All of this has been achieved alongside the landmark acquisition of Terminix, reinforcing Rentokil Initial as the largest pest control company in the world. Early progress on integration has been excellent. I am especially pleased with today’s announcement of an increase in expectations for total cost synergies to at least $200 million that evidences our strong conviction in the enlarged group’s financial and strategic opportunities going forward.’
Gym Group plunged 16%. After suffering a gut punch from the Covid-19 pandemic, the company would have hoped to have been in finer fettle by now. Its recovery will be slower than first thought, however, it warned.
‘This time last year, we reflected on emerging from the pandemic and indicated that we hoped 2022 would see a return to a more normal trading environment. It is now clear that it will take a longer time to return to pre Covid-19 levels as a result of both the changes to customers’ everyday lives and lifestyles and the macroeconomic headwinds that we are all facing,’ Chief Executive John Treharne said.
The low-cost gym operator said revenue for 2022 was 63% higher at £172.9 million from £106.0 million. Its pretax loss narrowed to £19.4 million from £44.2 million.
Gym Group said it has seen an ‘uneven’ start to 2023. Membership numbers have improved 8.4% from year-end to 890,000 at the end of February. That growth has slowed from 15% this time last year, however.
Elsewhere in London, Kooth jumped 37%. The digital mental health platform has been selected as a primary vendor partner by the California Department of Health Care Services. Kooth will deliver its digital mental well-being platform for children and young adults.
‘This contract has the opportunity to be a step change in both our work in the US and indeed more broadly as we continue to grow and scale our user base to help ever more people,’ Chief Executive Officer Tim Barker said.
In Hong Kong, shares in Baidu fell 6.4% as its rival to Microsoft-backed ChatGPT failed to impress.
Baidu Chief Executive Robin Li said Ernie Bot has not been perfected, but the company went ahead with presenting it due to high demand.
Baidu’s stock fell after Li showed a pre-recorded demonstration of the Ernie Bot instead of the real-time live demonstration many had expected.
Brent oil was quoted at $73.63 a barrel early Thursday afternoon in London, up from $72.03 late Wednesday. Gold was quoted at $1,925.13 an ounce, down from $1,934.17.
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