Stocks in London were in the green at the close on Thursday, after a sharp decline on Wednesday, buoyed by Credit Suisse receiving a lifeline from the Swiss central bank.
‘One minute the market is worried about a banking crisis, the next minute it is more relaxed. This hot/cold mentality creates an odd atmosphere and today we have another one of those days where investors are seemingly less worried. How long this situation lasts is another matter,’ said Russ Mould, investment director at AJ Bell.
The FTSE 100 index closed up 65.58 points, or 0.9% at 7,410.03 on Thursday. The FTSE 250 ended up 132.73 points, or 0.7%, at 18,758.58. The AIM All-Share closed up 3.67 points, or 0.5%, at 814.07.
The Cboe UK 100 ended up 0.9% at 741.23, the Cboe UK 250 closed up 0.8% at 16,347.98, and the Cboe Small Companies ended up 0.9% at 12,991.11.
Credit Suisse announced that it would borrow almost $54 billion from the Swiss central bank to reinforce the group after a plunge in its share price on Wednesday.
Its share price plunged after major shareholder Saudi National Bank declined to invest more in bank. On Thursday, the stock finished 19% higher.
The disclosure came just hours after the Swiss National Bank said capital and liquidity levels at the lender were adequate for a ‘systemically important bank’.
Neil Shearing, chief economist at Capital Economics, said ‘The problems at Credit Suisse are very different to those that brought down SVB a few days ago. But they serve as a reminder that as interest rates rise, vulnerabilities are lurking in the financial system.’
In London, Lloyds, Barclays, HSBC finished 3.5%, 3.1%, and 1.8% higher, respectively. Meanwhile, UBS shares finished up 3.4% in Zurich and BNP Paribas added 1.3% in Paris.
The pound was quoted at $1.2110 at the London equities close on Thursday, up from $1.2030 at the close on Wednesday.
In the FTSE 100, Rentokil surged 10% despite reporting its profit was down as its revenue jumped by a quarter on the back of its acquisition of Terminix.
The pest-control firm reported 2022 pretax profit of £296 million, falling 8.9% from £325 million in 2021, due to one-off and adjusting items and interest relating to its £6.7 billion acquisition of Terminix.
Revenue amounted to £3.71 billion, up 25% from £2.96 billion the year prior. The company said the revenue increase reflected the benefit of its mergers and acquisitions, particularly that of Terminix, as well as strong organic revenue, which grew 5.7% in North America and 9.1% in Europe.
In the FTSE 250, OSB rose 9.4% after it said profit increased in 2022 as it lifted its total dividend by 62% and also announced a share buyback.
The Kent-based mortgage specialist reported 2022 pretax profit of £531.5 million, up 14% from £464.6 million in 2021, thanks to growth in its loan book, improved net interest margin and net fair value gains on financial instruments.
OSB said it will repurchase £150 million worth of stock between now and this time next year. The aim of the buyback is to help to deliver ‘attractive and sustainable returns to shareholders across the cycle’, OSB said.
Currys dropped 7.9% as it bemoaned a tough consumer environment in the Nordics, appointing a new chief executive officer for the region amid ongoing performance challenges.
The electronics and electrical goods retailer replaced Nordics CEO Erik Sonsterud with Fredrik Tonnesen, who was at the time serving as chief operating officer in the region.
The switch, which has immediate effect, accompanies several other initiatives undertaken by Currys in an attempt to restore the Nordics business to its previously healthy levels of profit.
In European equities on Thursday, the CAC 40 in Paris ended up 2.0%, while the DAX 40 in Frankfurt ended 1.6% higher.
The European Central Bank stuck to its word and lifted interest rates by 50 basis points, despite banking sector turmoil.
However, in the press conference that followed the decision, the central bank’s president gave no hint about future direction.
The ECB previously had said it would raise rates by 50 basis points this month, though a dramatic equity market session on Wednesday, which saw shares in major European banks tumble, had cast some doubt over whether the central bank would follow through with a hike of that size.
Thursday’s move took the interest rate on the main refinancing operations, the interest rate on the marginal lending facility, and the deposit facility to 3.50%, 3.75% and 3.00%, respectively.
In a press conference after the announcement, ECB President Christine Lagarde said it was not possible ‘at this point in time’ to determine what the future path of interest rates. However, she said it would be data dependent and said that, if underlying inflationary pressures were to persist, then the central bank would have ‘more ground to cover’.
The euro stood at $1.0619 at the European equities close on Thursday, higher against $1.0538 at the same time on Wednesday.
Danni Hewson, head of financial analysis at AJ Bell, said: ‘Its business-as-usual approach could be seen as vote of confidence in the European banking sector. If it had changed tack some investors might have taken it as a sign central bankers were seriously concerned about the current situation.’
‘The big question on many minds is whether the [US Federal Reserve] will follow the ECB’s playbook or if it will soften its approach to inflation, at least for the time being,’ she added.
The Fed will announce its next interest rate decision on March 22. Markets are expecting a 25 basis point hike, according to the CME FedWatch tool.
Stocks in New York were in the green at the London equities close, with the Dow Jones Industrial Average up 0.6%, the S&P 500 index up 1.2%, and the Nasdaq Composite up 1.8%.
Against the yen, the dollar was trading at JP¥133.09 late Thursday, higher compared to JP¥132.43 late Wednesday.
Brent oil was quoted at $74.21 a barrel at the London equities close on Thursday, up from $72.03 late Wednesday. Gold was quoted at $1,918.22 an ounce, sharply lower against $1,934.17.
In Friday’s economic calendar, there is an inflation print from the EU at 1000 GMT.
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