No news was good news for stock markets on Tuesday, as no new indications of a wider banking industry crisis, combined with reassuring words from the Bank of England governor, allowed European large-cap stocks to rise slightly at midday.
In London, oil majors, miners and a broker upgrade for British Airways-parent IAG supported the FTSE 100. Banking shares traded mixed, meanwhile, having recovered Friday’s hefty losses at the start of the week.
‘After a parabolic fortnight, which has felt like a decade, the week has started on a much calmer note. However, officials will continue to have an information advantage over market participants, which makes the fear of the unknown a concern,’ SPI Asset Management analyst Stephen Innes commented.
The FTSE 100 index traded 12.19 points, 0.2%, higher at 7,483.96 midday Tuesday. The FTSE 250 was down 162.42 points, 0.9%, at 18,367.20, and the AIM All-Share was down 4.95 points, 0.6%, at 793.53.
The Cboe UK 100 was up slightly at 748.31, the Cboe UK 250 was down 1.0% at 15,959.65, and the Cboe Small Companies traded flat at 13,294.70.
In European equities on Tuesday, the CAC 40 index in Paris and the DAX 40 in Paris were both up 0.2%.
Stocks in New York were called to open largely lower. The Dow Jones Industrial Average was expected to open flat, but the S&P 500 and Nasdaq Composite were called 0.1% lower.
North Carolina-based First Citizens agree to purchase all loans and deposits from California’s Silicon Valley Bank, whose collapse earlier this month sparked fears about the sector globally. The deal calmed market fears on Monday.
Banking shares surged on Monday but struggled to maintain that momentum on Tuesday. In London, Barclays was down 0.4% at midday, Lloyds Banking traded flat and HSBC was down 0.1%.
Deutsche Bank fell 1.6%. The Frankfurt listing was at the heart of Friday’s stock market turmoil, though shares in the lender had recovered some ground on Monday, closing up 6.4%.
The collapse of Silicon Valley Bank was the fastest collapse since Barings failed in 1995, but the UK banking system is not in the same position as during the 2008 financial crisis, the head of the Bank of England has said.
Andrew Bailey, governor of the central bank, told members of Parliament on the Treasury Committee that the UK economy is in a ‘period of very heightened tension and alertness’.
Bailey said on Tuesday: ‘In my past 30 years, talking about the parent bank in the US to start with, Silicon Valley Bank saw the fastest passage from health to death really since Barings. That was a Friday to Sunday thing and this was pretty similar. The US authorities are still dealing with some of the consequences of the issues and the issues with regional banks which we saw with SVB.
‘My very strong view about the UK banking system is that it is in a strong position both capital and liquidity-wise, it is not showing signs of problems in that respect and we have tested very extensively.’
Barings failed in 1995 after a series of risky and fraudulent trades in Singapore by Nick Leeson, later made into the movie ’Rogue Trader’.
The dollar struggled on Tuesday.
Sterling was quoted at $1.2311 early Tuesday afternoon, up from $1.2268 at the London equities close on Monday. The euro traded at $1.0827, higher than $1.0782. Against the yen, the dollar was quoted at JP¥131.03, down versus JP¥131.50.
In London, shares in Shell and BP rose 1.4% and 1.8%, supported by a rise in crude prices. Brent oil was trading at $77.95 a barrel midday Tuesday, up slightly from $75.91 from the London equities close on Monday. Brent had risen as high as $78.27 earlier on Tuesday.
In addition, BP announced a plan to form a joint venture with Abu Dhabi National Oil Co to focus on gas development in areas of mutual interest, including the east Mediterranean.
As part of this, the two firms have offered to take NewMed Energy private.
Miners also supported the FTSE 100, as fears for the global economy from a possible banking crisis ebb. Glencore rose 1.8%, Anglo American added 1.2% and Rio Tinto climbed 1.0%.
International Consolidated Airlines Group rose 2.0%. Redburn lifted the stock to ’buy’ from ’neutral’.
Softcat surged 6.8%. It reported a half-year revenue decline but said profit came in ahead of expectations. The IT infrastructure provider said it now expects its annual outturn to be ‘slightly ahead of previous estimates’.
The Buckinghamshire-based firm said revenue in the six months to January 31 fell 11% to £512.4 million from £577.8 million. Pretax profit declined 1.7% to £63.1 million from £64.2 million.
Operating profit declined 1.7% on-year to £63.1 million from £64.1 million, ‘ahead of the board’s initial expectations’.
Gross profit, which does not take into account administrative expenses or finance costs, increased 18% to £177.1 million from £150.2 million a year prior. It was an outcome that beat expectations, Softcat said.
Putting pressure on the FTSE 250 index, Synthomer fell 12%, and CMC Markets declined another 3.2%.
Chemicals firm Synthomer said it swung to an annual pretax loss of £47.6 million, compared to a profit of £283.9 million a year before. Revenue from continuing operations rose 11% to £2.38 billion from £2.14 billion.
Synthomer said it was continuing to see ‘subdued levels of demand across most of [its] end markets and geographies’, but expected things to improve in the second half.
‘A new strategy to increase specialty weighting and a focus on higher-growth end markets is underway,’ broker Peel Hunt noted of the Synthomer announcement. ‘We await further discussion with management and the results meeting before making any changes to our forecasts/recommendation.’
CMC Markets late Monday warned on its annual outturn amid a tricky market environment in February and March. Shares in the trading platform fell 21% on Monday.
Unbound Group shares more than doubled to 8.93 pence, having closed at 4.00p on Monday. The footwear retailer said it is in discussions with clothing company WoolOvers Group about a potential takeover offer at 10.5p per share.
Unbound said it would be minded to accept an offer on such terms, which represents a hefty premium to Monday’s closing price.
Fellow AIM listing Team17 fell 8.7%. It reported a yearly profit fall and said its chief executive will step down once a replacement is found.
The video game development company and publisher of educational entertainment apps for children said a search to replace Debbie Bestwick has begun. Bestwick will move to a non-executive role when a new CEO is appointed.
In 2022, the company’s revenue jumped 52% to £137.4 million from £90.5 million in 2021, but pretax profit slipped 1.4% to £28.7 million from £29.1 million. Team17 noted £9.2 million in one-off acquisition-related costs, up sharply from £1.6 million in 2021.
Gold was quoted at $1,955.98 an ounce early Tuesday afternoon, down ever-so-slightly from $1,956.69 late Monday.
Still to come on Tuesday’s economic diary is a there is a US consumer confidence survey at 1500 BST.
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