FTSE 100 Live: FTSE up 1.8% as Credit Suisse crisis fears ease, eyes turn to US Fed

 (Evening Standard)
(Evening Standard)

London’s FTSE 100 index moved higher today as markets show signs of calming after the recent banking turbulence.

In today’s corporate results, B&Q and Screwfix owner Kingfisher stuck by City forecasts for the year ahead after reporting a 20% fall in adjusted profits to £758 million for 2022/23.

Meanwhile, substantial spending on energy support schemes meant public sector net borrowing for last month was £16.7 billion — some £9.7 billion more than a year ago and the highest February borrowing since monthly records began in 1993.

FTSE 100 Live Tuesday

  • Public sector borrowing hits February record

  • Bank shares rally as turbulence eases

  • B&Q and Screwfix owner’s profits fall

FTSE closes above 7500 after second day of rally

17:15 , Daniel O'Boyle

The FTSE 100 closed at 7536.22 today, as it continues to erase last week’s steep declines.

The FTSE gained 132.37 points, and has risen by more thann 300 points since 8:20am yesterday. The index is now down by 1.3% in the past week, after dramatic falls amid questions around the banking sector.

Banking stocks - which were heavily sold last week - were among the big gainers today, with NatWest rising by 5.7% and Barclays by 5.0%. The biggest winner, however, was Rolls-Royce, with shares up 6.4%.

Fears of rate rise shakedown in markets shift to Federal Reserve

14:43 , Simon Hunt

After a close shave for the global banking sector comes a close call at the world’s most important central bank.

The US Federal Reserve starts a two-day rate-setting meeting on Tuesday, having signalled its fight against inflation is not yet done.

At the same time, the impact on of its rapid run of interest rate rises on some of the biggest names in world finance is showing through in a spate of disruption in the banking sector, including emergency rescues, full-blown failures and global worries about potential contagion.

The Federal Open Market Committee meet just a week after Silicon Valley Bank’s multi-billion dollar collapse, the biggest failure in the sector since the 2008 Financial Crisis. And it is just days after former financial titan Credit Suisse was forced into a $3.3 billion (£2.7 billion) shotgun wedding with its one-time arch rival, UBS.

read more here

Stocks open higher on Wall Street

13:43 , Simon Hunt

Stocks opened higher after markets opened on Wall Street today after fears over a looming banking crisis began to ease.

First Republic Bank gained the most, rebounding from its record low amid a show of support from JPMorgan.

The S&P rose 1.1% in the minutes following the opening bell, while the Nasdaq rose 0.9% and the Dow rose 1%.

Just Eat lays off 1700 staff amid downturn in demand

13:13 , Simon Hunt

Food delivery firm Just Eat is to let go of 1700 staff, according to reports in the Telegraph, as the firm battles with a slump in demand.

The business announced the decision in a memo to workers earlier today. 170 operations staff are also understood to be impacted by the decision.

Just Eat said: “Just Eat UK is reorganising and simplifying its delivery operation as part of the ongoing goal of improving efficiency. As part of this process we have proposed to transition away from the worker model for couriers, which is a small part of our overall delivery operations - running in certain parts of six UK cities. There will be no impact to the service provided to partners and customers.

“Our top priority now is to support impacted employees and couriers. We are hugely grateful to our talented colleagues and couriers who have been part of the worker model in the UK.”

read more here

US stock recovery to continue

13:06 , Daniel O'Boyle

Shares in US companies are set to rebound alonside their European counterparts, according to futures markets, with futures for all leading stock indices up.

Dow Jones futures are up by 1.0% to 32461, while S&P 500 futures have risen by 0.9% to 3983. Nasdaq index futures are up 0.6% to 3983. First Rebpublic Bank, yesterday’s biggest faller, is the biggest premarket mover today, while fellow regional banks Truist and US Bancorp are also up by more than 4%.

‘Monster’ bank must not become too big to save

12:47 , Simon English

It’s hard to get emotional about banking (unless the emotion is anger, of course).

In Switzerland they see it different. Credit Suisse was a national icon, a champion. People either backed it or UBS as the Liverpool and Manchester United of the bank league.

It was tribal and competitive. And now it’s over — UBS won.

Read more here

Kingfisher eyes London high streets for roll-out of smaller B&Q Local DIY stores

11:53 , Daniel O'Boyle

B&Q could well be on its way to a London high street near you, as the FTSE 100 owner of the home improvement re-tools its retail offering to better suit post-pandemic urban living.

Kingfisher has identified sites for the roll-out of its B&Q Local brand of smaller outlets. There are eight of these stores already in London, with the latest two in Camden and Palmer’s Green and more on the way.

They offer a next-day click-and-collect service from the company’s full range as well as a selection of stock in store. Alongside the 300-outlet B&Q chain, the company also owns the Screwfix brand.

Read more here

SPACs are back as British biotech firm launches UK’s first 2023 Nasdaq listing

11:27 , Simon Hunt

There are signs the SPAC could be making a comeback as a British biotech company will today use the unusual vehicle to become the first UK firm to list on the Nasdaq exchange in 2023.

Zura Bio, which develops medicines for immune system disorders, has raised $65 million (£53 million) via a special purpose acquisition company or SPAC called JATT.

There was a surge in the use of SPACs during the 2021 stock boom with over 600 companies created on the public markets, according to S&P Global data. But that number tumbled 85% to just 86 in 2022.

Jura CEO Dr Someit Sidhu told the Standard: “We’re going to be one of the few SPACs that closes in this period – the threshold for getting a successful transaction done has gone up massively.

“I don’t think this will bring back the SPACmania of previous years but it shows there is a utility for this type of vehicle.”

read more here

S&P warns of increased bank default risk

10:38 , Daniel O'Boyle

Credit ratings giant S&P Global has warned that defaults for banks across the globe will rise, in a new report issued to address the turmoil facing the banking sector.

The report noted that while the sector should be more resilient than in 2008, risks still remain.

“Global banks are much better capitalized than in the past, but risks have not been eliminated and liquidity matters as well as solvency,” it said.

“Emergency liquidity measures by central banks and the expedited takeover have likely lowered the odds of broader banking system contagion, although the decision to write-off CS’ AT1 bonds may contribute to a higher cost of capital for banks.”

The report noted that, with interest rates likely to stay high for some time in order to bring down inflation, default risks will likely continue to rise.

Bank shares rally, FTSE 100 up 1%

10:27 , Graeme Evans

Heavily-sold banking stocks rallied today as blue-chips including Barclays and NatWest jumped by as much as 5%.

The gains built on yesterday afternoon’s turnaround in sentiment after markets had initially been sceptical of UBS’s weekend rescue deal for stricken lender Credit Suisse.

Barclays rose 6p to 143p today but the lender is still 15% short of where it stood prior to the confidence-shaking failure of Silicon Valley Bank less than a fortnight ago.

NatWest added 13.2p to 272p and Lloyds Banking Group surged 1.9p to 48p, while insurer Prudential recouped some of its recent heavy losses with a gain of 40.5p to 1053p.

The revival of banking stocks after a crisis that had swiped £30 billion from the value of London top lenders helped the FTSE 100 index to surge 1.3% or 99.92 points to 7503.77.

There was also support from the energy sector after Brent crude futures steadied at just above $74 a barrel, sending BP shares up 3% or 15.4p to 502.4p.

Other beneficiaries of the improved risk appetite included JD Sports Fashion, which jumped 4% or 6.1p to 170.45p, while British Airways owner IAG cheered 4.5p to 142.2p. The FTSE 250 index added 1.5% or 283.30 points to 18,778.43, led by a 6% rise for mid-market private equity firm Bridgepoint.

Elsewhere, investors were given a reminder of the rise-and-fall for valuations in 2021’s stock market listings boom when Trustpilot and Oxford Nanopore posted results.

The consumer reviews platform made its debut at 265p but now stands at 93p, having risen by half a penny today. It narrowed losses to $14.6 million but warned over tough conditions in the current quarter, adding that founder Peter Holten Mühlmann is to step down as chief executive and become brand ambassador.

Gene sequencing firm Oxford Nanopore reported good momentum at the start of 2023, helping shares lift 2% or 3.9p to 180.5p, but still well short of its 425p starting price.

Pearson to sell lossmaking online degree management arm

10:13 , Daniel O'Boyle

Textbook publisher Pearson is to sell its lossmaking online degree programme management business, once seen as its great hope for the future, to private equity business Regent for a cut of future profits.

Regent will pay Pearson 27.5% of the division’s profits for the next six years, though with the arm making a £26 million loss last year, that cut may be minimal. Regent will also pay a 27.5% share of its proceeds from “any monetisation event” of the online programme management arm.

In 2018, Pearson had called the online programme management arm “one of our biggest structural growth markets”, and revenue grew rapidly under Covid-19. However, after a contract with Arizona State University - one of America’s largest colleges - came to an end last year, Pearson put the arm under review.

“The sale of this business concludes the strategic review and demonstrates further progress in reshaping Pearson's portfolio towards future growth opportunities centered around lifelong learning,” Pearson said.

Early start for new Starbucks boss

09:38 , Simon Hunt

The CEO at the centre of one of the biggest trans-Atlantic moves in recent years will be starting his new role a little earlier than expected.

Laxman Narasimhan has taken over running global coffee giant Starbucks from its veteran leader, Howard Schulz, two weeks ahead of schedule, having been shadowing the famous executive, who has served as the Seattle giant’s chief three-times, since October.

Starbucks poached Narasimhan from the top job at Reckitt Benckiser, the FTSE 100 consumer products giant, which he had joined after a successful career at PepsiCo. His departure knocked shares in the maker of Gaviscon and Cillit Bang, having surprised the City because he had been in charge for just three years.

Narasimhan will now be in post in time for this week’s annual meeting of the company.

Banking sector turmoil could “blow away” public finance improvements

08:53 , Daniel O'Boyle

The latest public borrowing figures could give Jeremy Hunt room for manouvre in spending, an economist noted, but “turmoil” in the banking sector could put all of that recent improvement at risk.

Cumulative borrowing for  the financial year so far is £132.2 billion, which is a long way below the £152.4 billion projected by the Office of Budget Responsibility as part of last week’s Budget.

Ruth Gregory, deputy chief UK economist at Capital Economics, noted that this should have “raised the Chancellor’s hopes that he will be able to announce a pre-election giveaway later this year”.

“But the big risk is that the turmoil in the banking sector deepens the economic downturn and the recent improvement in the public finances is blown away,” she added.

Sticky end for British Honey Company

08:45 , Daniel O'Boyle

The British Honey Company - a maker of spirits as well as honey - is set to enter administration.

The business had been looking into ways to keep itself alive since October of last year, and while it received a loan in December to help fund its working capital requirements, it failed to secure any further funding.

“Regrettably, the Board has concluded that it is required to take the necessary steps to preserve value for creditors,” the company said.

As a result, it  has appointed partners at  FRP Advisory Trading Limited as its administrators and suspended trading of its shares on AQUIS.

ExpressVPN directors: Sagi could force shareholders to accept “undervalued” bid

08:41 , Daniel O'Boyle

Directors of ExpressVPN owner Kape have warned shareholders that gambling tycoon Teddy Sagi may leave them no choice but to accept his bid despite their “firm view that it materially undervalues Kape” by taking company private.

Sagi’s Unikmind Holdings - which already holds 54.8% of Kape - submitted a bid to acquire the remainder of the business in February. If accepted, Kape will delist from the London Stock Exchange’s Alternative Investment Market. Sagi said delisting would be the best decision for the current financial climate.

Unikmind added that, “regardless of the outcome of the offer”, it would aim to pass a resolution to take Kape private.

However, the independent members of Kape’s board said that the deal “undervalues” their business, which started in the adtech sector before acquiring one of the world’s  top VPN services.

But in a full letter explaining their decision, the independent directors said the resolution to take Kape private could scupper any resistance to the deal.

“Were Unikmind to become successful in obtaining sufficient voting rights in Kape to make the passing of a delisting resolution likely, Kape Shareholders would have to seriously consider accepting the offer despite the independent directors’ firm view that it materially undervalues Kape,” they said.

FTSE 100 improves, Barclays and Kingfisher shares higher

08:11 , Graeme Evans

The FTSE 100 index is 0.6% or 43.58 points higher at 7447.43, with stock market benchmarks in Paris and Frankfurt up by around 1%.

Among London-listed banking shares, Barclays rose 2% or 3p to 139p and NatWest improved 5p to 262.9p but HSBC bucked the trend by easing 0.7p to 541p.

Elsewhere in the FTSE 100 index, shares in B&Q owner Kingfisher lifted 6.7p to 280p after its results-day guidance on the outlook for the current year reassured investors.

Mike Ashley pledges £200 million in shares with HSBC and sells £8 million options to free up extra cash

07:53 , Simon Hunt

Mike Ashley, the billionaire owner of Frasers Group, has pledged around £200 million worth of shares to HSBC in a sudden rush for extra cash.

Frasers, which owns the Sports Direct brand, said the deal was “as security for any amounts which may be due from time to time under a derivatives trading facility” and Ashley would retain his voting rights in the shares, which represent over 5% of the share capital of the company.

Ashley also pocketed £8 million from selling put options in the business, Frasers said.

B&Q and Screwfix owner’s profits fall as Kingfisher struggles to keep lockdown DIY boom going

07:51 , Michael Hunter

Annual profit at the owner of the B&Q and Screwfix home improvement chain Kingfisher 40% fell as the uplift given to sales by pandemic-era lockdowns came out of the business’s numbers and inflation took a toll.

Pre-tax profit for the year to the end of January fell almost 40% to £611 million from sales of over £13 billion, down 0.9%.

Kingfisher said its sales were outpeforming the wider industry, with “big ticket” items such as new kitchens performing well, but e-commerce sales down by over 9%.

It pointed to a “multi-year cost reduction programmes continue to help offset inflationary pressures” while keeping its pricing competitive.

Thierry Garnier , Chief Executive Officer, said: “We have maintained a sharp focus on pricing to deliver value to our customers during this challenging period for household finances, while at the same time managing our cost inflation pressures effectively.”

FTSE 100 seen higher ahead of rates decisions

07:34 , Graeme Evans

The stock market reaction to the UBS-Credit Suisse deal improved gradually during yesterday’s session, meaning the FTSE 100 index and Wall Street’s S&P 500 finished 0.9% higher during their respective sessions.

Energy prices were under pressure for much of the day before a recovery left Brent crude back near to $73 a barrel by this morning.

Michael Hewson, chief market analyst at CMC Markets, said: “While the UBS deal raises a number of questions with respect to shareholder and bondholder priorities, regulators across the EU assured nervous markets that the Swiss bailout was unique to the two Swiss banks, while investors took the view that recent events would prompt a slowdown in the pace of central bank tightening this week.

“Even the problems being felt in the US banking system were being shrugged off with further weakness in First Republic Bank being treated as a localised difficulty, rather than anything more systemic.”

The US Federal Reserve’s policy meeting is due to start later today, with traders divided over whether tomorrow’s decision will see rates hiked, left on hold or even subject to a 0.25% cut.

CMC expects the FTSE 100 index to open 16 points higher at 7420 but with sentiment fragile until the outcome of tomorrow’s Federal Reserve meeting and decisions from the Swiss National Bank and the Bank of England on Thursday.

Public borrowing hits February record

07:29 , Daniel O'Boyle

UK public sector borrowing last month was the highest for a February ever, at £16.7 billion, well above City expectations of £11.4 billion.

The total was up from £7.0 billion last February, with the rise mostly due to the energy price guarantee.

The public sector deficit - the amount borrowed for day-to-day spending - was £10 billion, while £6.7 billion was borrowed for public investment.

Net Governemnt receipts came to £77.8 billion, as PAYE income tax grew by 11.3%.

The country’s debt-to-GDP ratio, meanwhile, hit 99.3%, which the Office for National Statistics noted was about the same as the level reached in the early 1960s.

Trustpilot CEO to quit as firm warns it has ‘felt the effects' of the economic slowdown

07:22 , Simon Hunt

Trustpilot founder Peter Muhlmann is to step down as CEO of the business as the online review site begins a search for a replacement.

]Muhlmann said he wanted to “have the chance to focus my efforts and skills on promoting our brand and helping to drive the Trust agenda around the world. I have felt for some time that this is where I can make the greatest contribution and add the most value to Trustpilot in the years to come.”

Trustpilot revenue grew 23% to $149 million in 2022, while losses narrowed from $25.9 million to $14.7 million. However, the firm warned it had “felt the effects of the uncertain macro environment on new business and retention bookings in Q1, which will result in lower revenues from in-period bookings in FY23.”

UBS outlook cut to negative by S&P and Moody’s

07:09 , Simon Hunt

UBS has suffered a blow from its emergency takeover of Credit Suisse after its outlook was cut to negative by credit ratings businesses S&P and Moody’s.

“We see material execution risk in UBS’ integration of Credit Suisse,” S&P analysts wrote.

“This could mean a weakening of the combined group’s competitive position or underperformance against its financial targets because of sizable restructuring or litigation costs, pressure on revenue capacity, or setbacks in realizing cost savings.”

Moody’s analysts said “the action balances on the one hand the advantageous financial terms in terms of liquidity and capital together with the long-term potential for franchise enhancement, and on the other hand the complexity, extent and duration of the integration.”

UBS shares plunged yesterday before making a recovery late into the trading session.

Recap: Yesterday’s top stories

06:51 , Simon Hunt

Good morning. Here’s a summary of our top stories from yesterday.

  1. Billions were knocked off the value of banks amid continued fears following the rescue of Credit Suisse.

  2. Staff at Credit Suisse have been promised a bonus despite the emergency takeover by UBS,

  3. Analysts are now split on whether there will be a further interest rate rise by the Bank of England later this week.

  4. Amazon are to let go of another 9,000 staff as the tech giant intensifies its cost-cutting measures.

Today we’re expecting:

  • Results from Kingfisher

  • Results from Oxford Nanopore

  • Public sector borrowing figures