Share prices were slightly lower but sterling was steady early Wednesday, ahead of the UK government budget at midday and another US inflation reading about the same time.
Nonetheless, a strong day for European and US stocks on Tuesday, and Asian counterparts on Wednesday, suggests some serenity has followed the agitation caused by the collapse of Silicon Valley Bank in the US, analysts at Lloyds Bank said.
‘Calm is returning to markets as investors become more convinced that the problems at SVB will not extend to other banks. Nevertheless, monetary authorities may still be more cautious for now about raising interest rates further,’ Lloyds analysts added.
The FTSE 100 index opened down 40.58 points, 0.5%, at 7,596.53. The FTSE 250 was down 81.80 points, 0.4%, at 19,047.86, and the AIM All-Share was down 3.04 points, 0.4%, at 824.65.
The Cboe UK 100 was down 0.4% at 760.56. The Cboe UK 250 also was down 0.4%, at 16,649.84. The Cboe Small Companies was up 0.5% at 13,744.19.
In mainland Europe, the CAC 40 in Paris was down 0.3%, while DAX 40 in Frankfurt was marginally lower.
In Tokyo, the Nikkei 225 ended slightly higher, while the S&P/ASX 200 in Sydney climbed 0.9%. In China, the Shanghai Composite closed up 0.6%, while in Hong Kong, the Hang Seng index surged 1.5%.
Lifting the market mood on Wednesday was a report showing Chinese retail sales rebounded in January and February. This came after Beijing abandoned its suffocating zero-Covid policy, reopening borders and ending mandatory quarantine, and as the country celebrated the Lunar New Year holiday.
The 3.5% growth, released by the National Bureau of Statistics, came in line with expectations and was much better than the 1.8% drop suffered in December, indicating the world’s number two economy was picking up after years of painful restrictions.
And with Beijing this week announcing it will resume issuing tourist visas, there is a hope for a further improvement this year.
Still to come on Wednesday is a US producer price index reading at 1230 GMT, with the UK budget statement expected around the same time.
Annual US producer price growth is expected to slow to 5.4% for February, according to consensus cited by FXStreet, from 6.0% in January.
Figures on Tuesday showed growth in the US consumer price index slowed to 6.0% last month from 6.4% in January.
In New York on Tuesday, the Dow Jones Industrial Average closed up 1.1%, the S&P 500 up 1.7% and the Nasdaq Composite up 2.1%.
The head of Silicon Valley Bridge Bank, created by US regulators to succeed Silicon Valley Bank after it collapsed, on Tuesday urged fleeing depositors to return with their money, as large banks see an influx of funds.
Silicon Valley Bank - a key lender to startups across the US since the 1980s - collapsed after a sudden run on deposits, prompting regulators to seize control Friday.
‘The number one thing you can do to support the future of this institution is to help us rebuild our deposit base,’ Chief Executive Tim Mayopoulos said in a statement, ‘both by leaving deposits with Silicon Valley Bridge Bank and transferring back deposits that left over the last several days.’
He added: ‘We are doing everything we can to rebuild, win back your confidence, and continue supporting the innovation economy.’
Still to come on Wednesday is UK Chancellor Jeremy Hunt’s spring budget.
Hunt will pledge to tackle labour shortages and get people back to work when he delivers his budget.
Announcements on energy bill support, benefits reform and pensions allowances are all expected to form part of the budget package when Hunt addresses MPs on Wednesday afternoon. He is expected to resist calls from Conservative backbenchers to go further on tax cuts, however.
Sterling bought $1.2151 early Wednesday, flat versus $1.2150 at the London equities close on Tuesday. The euro rose to $1.0736 from $1.0719. The dollar rose to JP¥134.94 from JP¥134.45.
Analysts at ING commented: ‘Expect another rangy session for FX markets and focus on today’s UK ’budget for growth’.
‘We doubt anything in the budget will be sterling negative - after all taxation levels are near the limit - but equally we do not see it as especially sterling positive either. With the Bank of England nearer to a pause than most, we think EUR/GBP can reclaim recent losses and head back to 0.89, while cable may struggle to break 1.22.’
In London, insurer Prudential fell 4.1% in early dealings. It said annual premium equivalents - a measure of the new policies sold - rose 4.7% to $4.39 billion from $4.19 billion in 2021. The figure came in ahead of company-compiled consensus of $4.22 billion.
Gross premiums earned, however, fell 3.6% to $23.34 billion from $24.22 billion. Hurting its bottom-line, meanwhile, was a $30.16 billion investment loss, swinging from a return of $3.49 billion in 2021.
Pretax profit halved to $1.48 billion from $3.02 billion. European embedded value operating profit, however, increased 12% to €3.95 billion. The latter figure is based on longer-term investment returns and ignores short-term fluctuations.
Pru declared a second interim dividend of 13.04 cents per share, up 9.9% from 11.86 a year earlier. It gave a total yearly payout of 18.78 cents per share, up 9.0% from 17.23 cents.
Last year was Prudential’s first full-year as an Asia and Africa focused business. In recent years, it has demerged UK fund manager M&G and US insurer Jackson.
Chief Executive Anil Wadhwani said: ‘The removal of the bulk of Covid-19-related restrictions across the region and the progressive opening up of the Chinese mainland economy has meant that 2023 has started well with encouraging progress in year-on-year sales, with group-wide APE sales for the two months ended February 2023 up 15% [at constant currency] over the prior year.’
Shares in promotional products marketer 4imprint surged 7.1%, among the best mid-cap performers. It said revenue in 2022 jumped 45% to $1.14 billion from $787.3 million.
Pretax profit multiplied to $103.7 million from $30.2 million.
Deutsche Bank said Prudential’s results were mixed compared to market expectations. They are ‘on either side of the line, with [annual premium equivalent] and [new business profit] missing consensus marginally (the latter due to higher rates and slightly worse mix), but IFRS profit, balance-sheet metrics and the dividend marginally better.’
4imprint quadrupled its final dividend to 120 cents per share from 30 cents, giving it a total yearly ordinary payout of 160 cents, up markedly from 45 cents. What’s more, it announced a 200 cents special dividend.
‘Following an extremely strong trading performance in 2022, we enter the 2023 financial year with momentum and confidence. Trading results in the first few weeks of 2023 have been encouraging,’ 4imprint said.
Elsewhere in London, Hyve surged 12%. The events organiser agreed to a £320 million takeover from investor Providence Equity Partners. The bid values each Hyve share at 108p, a 41% premium to its 77p stock price the day before it received an approach from Providence back in February.
The takeover offer gives Hyve an equity value of £320 million and an enterprise value of £481 million. Providence made an approach back in February, pitching a bid of 105p per share.
Hyve said the bid announced on Wednesday has the support of around 17% of shareholders.
Chair Richard Last added: ‘The board believes the offer represents value for shareholders and that Providence, with their knowledge of the sector and belief in the business and management team, will be a good partner for Hyve. I would like to take this opportunity to recognise the exceptional contribution of our people, whose commitment and hard work have fundamentally changed Hyve for the better, and place us at the forefront of our industry.’
On AIM, Cordel jumped 56%. It said it has struck a contract in the US with intercity passenger rail service provider Amtrak.
The $6.7 million deal will see Cordel supply a ‘fully automated software suite for survey and clearance management’.
‘Cordel will deliver an automated clearance system that leverages artificial intelligence and automated LiDAR data capture (laser scanning), working with its UK clearance assessment partner, DGauge Ltd, to manage and optimise the clearance data,’ Cordel said.
The pact has an 18-month configuration and reporting phase, before a five-year software-as-a-service phase.
An ounce of gold faded to $1,888.01 early Wednesday from $1,903.01 late Tuesday. A barrel of Brent traded at $78.39, down from $79.36.
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