- FTSE 100 index closes 66 points higher
- US stocks recover as banking falls ease
- ECB hikes European interest rates by 50 basis points
4.45pm: FTSE finishes higher
At the close, the UK's blue chip index was a far cry from yesterday's bloodbath, finishing at 7,410 points for a 0.9% gain from opening levels.
Banking fears have slowly eased, with markets moving higher despite the 50-basis point rate hike from the ECB, said Joshua Mahony, senior market analyst at online trading platform IG.
“European markets are on the front foot as we close out a day that has seen both the Swiss and European Central Banks step in to ease contagion concerns in the banking sector. The $53.7 billion SNB liquidity pledge provided to the beleaguered Credit Suisse bank helped lift sentiment into the ECB rate decision, with Cristine Lagarde doing her best to allay fears that others may be in trouble," Mahoney wrote.
"Part of this newfound confidence comes in response to Lagarde’s insistence that the 2008 crisis has resulted in a significantly more stable and better-equipped financial services industry. Nonetheless, the gains seen today should continue to be taken against the backdrop of significant risk and uncertainty, with ECB vice-president Luis de Guindos recently warning that some EU banks will be adversely affected by higher interest rates. ”
3.45pm: Interest rates eyed
Although the mood has improved in London and New York as banking worries ease slightly, the focus will undoubtedly switch to next week's Federal Reserve policy meeting, especially after the European Central Bank (ECB) hiked eurozone interest rates by 50 basis points today.
Commenting on the latest ECB interest rate decision, Danni Hewson, head of financial analysis at AJ Bell said: “Markets had been pondering whether the current banking turmoil would prompt European central bankers to dial down their rate hike plans, but the ECB ploughed ahead with a 50 basis point rise, again citing its determination to return inflation to its two percent target.
“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.
“That said, the ECB was at pains to make clear that it was acutely aware of current tensions and indicated it was ready and able to step in if things deteriorate further.
“It was pretty much a repeat of President Biden’s ‘whatever is needed’ pledge, in a bid to restore confidence after a series of shocks that have shaken nerves and raised the spectre of another global financial crash."
“The big question on many minds is whether the Fed will follow the ECB’s playbook or if it will soften its approach to inflation, at least for the time being," Hewson concluded.
3.20pm: First Republic in play?
US stock indexes recovered as losses in the banking sector eased, notably First Republic Bank stock after the Wall Street Journal reported that several of the biggest US lenders are in talks to shore it up.
According to an exclusive on the newspaper's website, First Republic is working on various potential options including a capital raise that could take various forms, the people said. A full takeover is also a possibility, though some of the people cautioned that looks unlikely at this point.
JP Morgan and Morgan Stanley were said to be among the lenders involved in the talks.
Should there be a deal, it could come together in the coming days, the people said.
In New York, after almost two hours of volatile trading, the Dow Jones Industrial Average was up 95 points, or 0.3%, to 31,970, while the S&P 500 added 0.7%, and the Nasdaq Composite gained 1.2%.
At around 3.20pm, the FTSE 100 index was 59 points, or 0.8% higher at 7,403, still way below the day's peak of 7,458.64.
3.00pm: Moody's music
Moody's will monitor Credit Suisse's situation and "act appropriately", the ratings agency said after the troubled lender borrowed up to $54 billion from Switzerland's central bank, Reuters has reported.
A slide in the Swiss lender's shares had threatened to spiral into a wider banking crisis on Wednesday, raising doubts over whether central banks will be able to sustain aggressive interest rate hikes.
Moody's analyst Ana Arsov said the rating agency would "act appropriately" with regards to the bank's credit rating, Reuters noted.
Separately, Moody's said Europe's banking systems remain in fundamentally good health despite the failure of several lenders in the United States and ongoing problems at Credit Suisse.
Having a lower proportion of their assets in bonds means Europe's lenders are less exposed to fluctuating interest rates than their US counterparts, Nick Hill, a managing director at Moody's, told investors and reporters, Reuters said.
Moody’s on Tuesday revised its outlook on the US banking system to “negative” from “stable”, citing heightened risks for the sector after the collapse of SVB Financial Group and Signature Bank fuelled fears of contagion.
2.40pm: Telford capitulates
Telford Homes has capitulated to threats from Housing Secretary, Michael Gove and signed a pledge to fix faulty cladding similar to that which led to the fire at Grenfell Tower, City AM reported.
The firm, one of London’s largest residential developers was one of 11 firms told by Gove that they would be prevented from building new properties unless they signed the remediation pledge.
“Telford Homes can confirm we have signed the government’s binding pledge contract”, a spokesperson told City AM today.
By signing the contract, the developers accept responsibility to fix fire-safety defects in buildings more than 11 metres high that they built or refurbished.
Thirty-nine developers have so far signed the pledge, including the ten biggest housebuilders in the country.
Telford Homes was acquired by CBRE Group's real estate development subsidiary Trammell Crow Company in a £267 million deal in October 2019.
2.20pm: ECB surprises
Commenting on the ECB surprisingly raising rates as market turmoil following SVB failure continues, Tom Hopkins, Portfolio Manager at BRI Wealth Management, said: “The European Central Bank has stuck to its plans and raised interest rates by 50 bps on Thursday, further pushing borrowing costs to the highest level since late 2008, to help temper the region’s stubbornly high inflation.
"Some may find this increase surprising given investors fears over the strength of the banking system. The failure of Silicon Valley Bank last week has permeated fear across global financials over the last few days resulting in some very heavy sell-offs in European financials.
"The news this morning that Credit Suisse has secured a loan from the Swiss central banks has brought a small relief rally to markets today however we think it’s too early to tell as to whether the Silicon Valley Bank demise was just a one-off event. All eyes now will turn to the Fed’s rate decision next week.”
2.00pm: Dow weaker at start
The FTSE 100 index saw its gains reduced further as US stocks started with volatility with banking sector woes continuing to weigh, but tech stocks finding some support again.
Around 30 minutes after the opening bell in New York, the Dow Jones Industrial Average was down 176 points, or 0.8%, to 31,698, while the S&P 500 lost 0.6%, but the Nasdaq Composite rallied from opening falls adding 0.1%.
The regional banking sector continued to take hits. First Republic Bank stock was down nearly 30% early Thursday after already taking major losses earlier in the week. Credit Suisse, which announced last night that it would borrow as much as $54 billion from the Swiss National Bank, is up 3%.
Investors are fearful of which banks might be weak links in the wake of the Silicon Valley Bank collapse. That feels familiar, said Greg Fleming, CEO of Rockefeller Capital Management.
“What’s also similar to ’08 is the hunting in the market for who’s the most weak next,” Fleming said on CNBC’s “Squawk Box.” “And the proxy’s been uninsured deposits.”
In London, around 1.55pm, the FTSE 100 index was up 50 points, or 0.7% at 7,394.
1.42pm: Here’s a rundown of the top risers and fallers among the smaller caps today
Shares in heat recovery specialist Inspirit Energy Holdings PLC (LSE:INSP) warmed up 33% as it said it was in talks to partner with a “major automotive group” during an operational update, with investors shrugging off “minor” delays due to supply chain issues.
Digital mental health platform provider Kooth PLC (AIM:KOO) saw the weight lifted off its shoulders as its shares rose over 30% on the news it was to deliver its platform en masse in California.
Kooth said it had signed a contract with California’s healthcare services department to roll out its service in the US state to six million 13-25 year olds, under local governor Gavin Newsom’s US$4.7bn investment in youth behavioural health.
Challenger bank OSB Group PLC (LSE:OSB) shares rose after it announced profits above consensus, a £200mln of shareholder returns and, along with the rest of the sector, was carried higher in the rebound from market sell-off earlier in the week.
Burford Capital Limited (LSE:BUR) shares crumpled 20% after a generally positive trading update, where it reported on a better year for cash realisations but a lack of progress on its major Argentinian claim and delayed publication of its full accounts due to ongoing discussions with the US financial regulator.
Talks between the litigation finance funding specialist and the US Securities and Exchange Commission (SEC) have been going on for six months over whether to adopt a new fair valuation methodology for legal finance assets.
The Gym Group PLC (LSE:GYM) saw its shares fall by more than 16% after it warned rising costs would offset improvements in full-year revenue.
In a statement alongside results for the 12 months to December 31, 2022, the no-contract gym operator said it expects the current difficult macroeconomic environment and its impact on consumer demand to continue throughout the year.
Pineapple Power Corporation PLC (LSE:PNPL) shares fell 12% after the special purpose acquisition company (SPAC) announced it had raised £350,000 at a price of 3p for general working capital as it looks to retain sufficient funds for any potential acquisition in the renewable energy sector.
1.20pm: ECB lays out a 50bps rate hike
European Central Bank president Christine Lagarde has announced a 50basis point interest rate hike to 3.5%, pushing borrowing costs to the highest level since late 2008.
The markets were of the likelihood of another half a percent rate rise, given the turmoil n the banking sector, but ultimately inflation concerns have won out.
source: tradingeconomics.com
1.08pm: ECB rate decision due shortly
Analysts continue to deliberate on the outcome of the European Central Bank’s pending interest rate decision.
TickMill Group’s market analyst James Harte calls it “a very tough call for the ECB s it tries to navigate achieving its inflation target while balancing financial stability risks”.
The market was all but assured of a 50bps hike until late last week, when a banking mini-crisis led to the collapse of Silicon Valley Bank and a trading half for Credit Suisse yesterday.
“If the ECB opts for a smaller hike, and a less hawkish outlook, this might well have a less detrimental impact on banking stocks. However, the broader issue remains inflation,” said Harte.
He added: “With inflation showing stickiness around current high levels, the bank has not yet achieved its goal of taming upward price pressures. In this scenario, EUR is likely to fall also.”
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: “With yesterday’s fresh stress on bank stocks, a 50bp hike from the ECB at today’s monetary policy meeting is less than certain.
“But maybe, the ECB will remain on course and hike by 50bp today. It’s hard to tell.”
We’ll find out in a few minutes.
12.56pm: US jobs data comes in hot
Unemployment benefit claims in the US dropped by 20,000 from the previous week to 192,000, exceeding the expectations of economists who had predicted it would be around 205,000.
The decline highlights further evidence of a tight labour market in the United States, which has been consistent with the hot payroll figures for February.
source: tradingeconomics.com
Tighter employment data will heap pressure on employers to raise wages, which may cause inflationary concerns among Federal Reserve policymakers in the run-up to next Wednesday’s interest rate decision.
The US Dollar Index (DXY) has shrugged off the jobless data, while Cable remains bullish at 1.207, having added 0.2% today.
12.42pm: Wall Street to open mostly flat
Wall Street is expected to open mostly flat as investors remain on edge after Credit Suisse went cap in hand to the Swiss central bank for a loan, reigniting fears of a sector-wide crisis similar to that of 2008/2009.
Futures for the Dow Jones Industrial Average declined 0.1% in Thursday pre-market trading and those for the broader S&P 500 index barely budged, but contracts for the Nasdaq-100 bucked the trend with a 0.3% gain.
Credit Suisse said it was taking up the Swiss National Bank’s pledge of support with a $54bn loan to support its balance sheet. That followed the collapse of US banks Silicon Valley Bank and Signature Bank.
The tech-heavy Nasdaq saw a slight recovery by the closing bell on Wednesday to finish six points ahead at 11,434. But the Dow Jones and the S&P 500 were both under water, losing 0.9% and 0.7% respectively to finish at 31,875 and 3,892 points.
"Global equity markets are definitely struggling to find direction as the first quarter of 2023 draws to a close, with the only certainty right now seeming to be elevated levels of volatility," commented James Hughes, chief market analyst at Scope Markets. "Wall Street’s losses on Wednesday were mitigated in part by a late session rally, but futures prices are flitting around making opening direction difficult to call.
The next test will be the European Central Bank’s rate decision later today, where AJ Bell investment director Russ Mould said it may opt for a 25-basis point hike rather a more aggressive 50-basis point hike given the nervousness around the banking system.
“If it went down this path, it would in effect be doing a dress rehearsal for the Federal Reserve next week,” he added. “The prospect of a 50-basis point hike from the Fed now seems unthinkable. Equally, being overly cautious might send another worrying message."
“Given the strength of the US jobs market and sticky inflation, the US central bank would have to show extreme fear at the financial system if it was to leave rates untouched or even cut them," Mould said. "Instead, a 25-basis point hike would be its way of biding time to assess the situation but also stay on the path to taming inflation.”
11.54am: First Republic Bank, US regional banks to open lower
The market rebound being enjoyed by Credit Suisse and London’s banking set has not seemed to rub off on US regional banks, which have been hit hardest in the fallout following Silicon Valley Bank.
California’s First Republic Bank appears worst off, with shares down a further 26% in pre-market trades, while Arizona-based Western Alliance Bancorporation is due to open 10% lower.
The iShares U.S. Regional Banks ETF is down 3.1% to US$34.94 from last night’s close.
Regional banks are suffering significant outflows following SVB’s collapse, as customers take flight to supposed “too big to fail” US banks.
JPMorgan Chase & Co (NYSE:JPM) is down a less bruising 0.2%, while Bank of America has added 0.35% in pre-market trades.
Bank in the UK, Lloyds Bank, Barclays and HSBC are up in the low single digits, aiding the FTSE 100’s 1.1% daily gains.
11.25am: John Lewis swings to a loss
John Lewis Partnership has reported a loss of £78mln in its delayed full-year earnings call, compared to a profit of £128m the previous year, primarily due to property write-downs.
Pre-tax losses deepened to £234mln from £27m.
The retailer has opted out of a share bonus as a result, although the financial assistance fund of £800,000, as well as support for childcare, travel and living costs, will remain in place to support staff.
Total partnership sales fell 2% to £12.25bn, with Waitrose sales down 3% to £7.3bn, and John Lewis sales up 0.2% to £4.94bn.
Higher-end retailers appear to be bearing the brunt of reduced customer spending.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, commented: “The cost-of-living crisis has been blowing a chill wind through the retail sector but has whipped up a hurricane of problems for John Lewis.
“Although the high street has shown pockets of resilience among retailers offering value-for-money essentials, the nice-to-have items which are John Lewis’ bread and butter have been dropping out of shopping baskets fast.”
Among the publicly listed retail set, FTSE 250 constituent Marks & Spencer Group plc has recovered 1.1% to 147p, while Primark’s FTSE 100 parent company Associated
British Foods plc is up over 2%.
FTSE 100 has retreated from intraday highs of 7,435 to 7,396 as of 11.25am.
10.53am: Credit Suisse surges
Credit Suisse’s £45.5bn central bank bailout lifeline has been a boon for the bank’s share price today
After plummeting below two Swiss francs yesterday and copping a trading pause, the bank has bounced back nearly 20% in this morning’s trading session.
Year to date, the shares remain 25% down, and over 70% down year on year.
Its Thursday rebound reflects a bit of renewed confidence in the market, with Barclays PLC (LSE:BARC), Lloyds Banking and HSBC driving the FTSE 100’s 1.1% recovery this morning.
London is outperforming Frankfurt and Paris, which have added 0.74% and 0.9% respectively.
The UK- and Europe-wide Stoxx 600 banking index has added 1.35%.
10.19am: ‘One and done’ UK rate hike priced in
As the market awaits the ECB’s interest rate decision, Laith Khalaf, head of investment analysis at AJ Bell, is among many people looking to next week’s announcement from the Bank of England.
Following Silicon Valley Bank’s collapse and a near-death experience for Credit Suisse, major central banks are under pressure to take the lever, and the BoE is no different.
Khalaf sees the market pricing in a “one and done” rate hike, positioning the terminal rate at 4.25%.
However, precisely when that one is done is a matter of speculation.
“There is considerable uncertainty about the precise timing of the remaining interest hike that’s been pencilled in though, with a 50% chance placed on it happening at the forthcoming March meeting,” said Khalaf.
“That means the market is pricing in a 50% chance we won’t get an interest rate rise in March, which would be the first time without a hike since November 2021.”
10-year gilt yields opened slightly higher today, adding nine basis points to 3.409%, although the yields has been showing fairly consistent declines in the month to date.
Back to today’s ECB decision, “the market’s prior foregone conclusion of a 50bps hike… has been whittled down to a coin toss today”, said Han Tan, chief market analyst at Exinity, though other would suggest that a coin toss gives 50bps too much credence.
The euro is looking strong against the pound this morning though, adding 0.35% to 87.98p on the EUR/GBP pair.
9.27am: FTSE firmer, but off highs
The FTSE 100 opened higher, as confidence returned on Credit Suisse’s announcement it would borrow almost US$54bn from the Swiss central bank to shore up its finances.
It had prompted banking shares to spiral on Wednesday, after key investor Saudi National Bank warned it could no longer prop up the bank, seeing its Credit Suisse stock repeatedly suspended from trading.
Deliveroo narrowed its annual losses to £45mln in 2022, down from £100mln a year earlier, adding it was on course for improved earnings this year.
Halma also hinted it was on course to meet expectations, explaining it had made good progress so far in 2023 and would likely strike a £359.9mln pre-tax profit for the full-year.
Virgin Orbit was less upbeat though, announcing it was pausing all operations for at least a week and furloughing staff, as it looks for a new investment plan to battle financial woes.
And with the small caps, researcher hVIVO rose 2% after announcing it had successfully manufactured its Omincron human challenge agent.
9.00am: Footsie in recovery mode
After copping a nearly 4% beating on Wednesday, it feels like the only way is up for the UK lead index.
Footsie has managed to recover 1.2% to 7,435 in the early morning session, with a fair chunk of the recovery emerging from battered banking stocks, namely Barclays, Lloyds and HSBC.
Rentokil’s dividend boost announced today has sent the pest control kings to the top of the FTSE 100 table, adding 7% to 537p in early trades.
Helios Towers is also coming off strong from its full-year earnings call, adding around 6% after underscoring a 25% year-on-year revenue increase and 18% adjusted EBITDA increase.
The headlines are undoubtedly focused on Credit Suisse following yesterday’s dramatic trading halt. The beleaguered bank has taken out a £45.5bn loan from the Swiss central bank to reinforce the group's balance sheet after yesterday’s plunge.
"My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs," said chief executive Ulrich Koerner.
In the European markets, Frankfurt has added 1.1% to 14,900 while Paris is up 1.3% to 6,974.
Bitcoin has been one of the benefactors of the latest round of market instability, and it remains steady at US$24,600 today, having added 1.3% in the past 24 hours.
But digital gold isn’t as strong as real gold, which remains near record highs of £1,590 an ounce.
Looking ahead, today we have the ECB’s interest rate decision, the first of the major central banks to do so in the midst of a genuine banking crisis.
Previous pricing in a 50bps hike, the market has readjusted its expectations down to 24bps, perhaps even zilch. We’ll find out this afternoon.
8.30am: FTSE 100 opens higher
Footsie has opened 0.9% higher at 7,409, but after yesterday’s brutal session, accumulated year-to-date gains remain wiped out.
Banking stocks are enjoying some recovery this morning, with Barclays PLC (LSE:BARC) up 3%, HSBC Holdings PLC (LSE:HSBA) up 2.9% and Lloyds Banking Group PLC (LSE:LLOY) around 2.6% higher.
NatWest, on the other hand, is still in the red.
“The next few days will be critical in determining sentiment with no news being good news within the banking sector, where it is still hoped that the twin issues seen so far are not only different but isolated and contained,” said Richard Hunter, head of markets at interactive investor.
8am: Pound, euro strengthen against dollar
The pound sterling added 20 pips against the dollar during this morning’s Asia trading session, bringing the pair to 1,209, though Cable bulls still have work to do before recapturing yesterday’s 84 pip losses.
The euro also strengthened against the dollar, adding 45 pips to 1.062 following yesterday’s 1.4% stumble.
EUR/GBP is nearly 0.2% higher this morning following yesterday’s 0.7% drop.
Chancellor Jeremy Hunt’s Budget, short on surprises and overshadowed by the banking meltdown as it was, is unlikely to be influencing the forex markets in any particular way
Traders are more likely to react to the ECB’s interest rate decision this afternoon. A 50bps hike, which is considerably less likely than it was a week ago, would galvanise the euro bulls, but they’re unlikely to get what they want.
7.28am: Asia closes in the red, all eyes on ECB rate decision
Asian markets are all in the red as the trading window winds up, with Japan’s Nikkei index down 0.85 TO 27,010, Hang Seng nearly 2% down to 375 and Shanghai slightly over 1% down to 3,228.
On the economic calendar, today’s focus is on the ECB’s interest rate decision. Previously expecting a 50bps hike, the market has readjusted it expectations down to 25bps following the turmoil in the banking sector.
The ECB has the unenviable task of being the first major central bank to make the call in the midst of a banking meltdown
Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank said: “With yesterday’s fresh stress on bank stocks, a 50bp hike from the ECB at today’s monetary policy meeting is less than certain.
“Although the hotter-than-expected inflation data from France would’ve granted a 50bp hike, and a few more to come, the ECB may opt for a softer rate hike, or no rate hike at today’s meeting, to let the dust settle before acting further.”
In short, nothing is certain.
There is also a slew of US data on the way, including import prices, export prices and jobless claims.
In the UK, the FTSE 100 is being called 55 points higher to 7,384 in pre-market trades.
7.00am: FTSE to open higher
The FTSE 100 is expected to open sharpy higher after Credit Suisse announced Thursday that it would borrow almost US$54bn from the Swiss central bank to reinforce the group after a plunge in its share prices on Wednesday.
Spread betting companies are calling London’s lead index up by around 51 points.
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", even as it pledged to make liquidity available if needed.
In a statement, Credit Suisse said the central bank loan of up to Swiss francs 50 billion, or US$53.7bn, would "support... core businesses and clients", adding it was also making buyback offers on about US$3bn worth of debt.
Credit Suisse Group announces public tender offers for debt securities and takes decisive action to further strengthen liquidity. All details available here: https://t.co/S9v2JAiCuw pic.twitter.com/71qZcZsM9W
— Credit Suisse (@CreditSuisse) March 16, 2023
"These measures demonstrate decisive action to strengthen Credit Suisse as we continue our strategic transformation to deliver value to our clients and other stakeholders," Chief Executive Ulrich Koerner said in the statement.
"My team and I are resolved to move forward rapidly to deliver a simpler and more focused bank built around client needs."
US markets closed well off earlier lows after the intervention by the Swiss Central Bank with the Nasdaq ending higher.
On Wall Street, the On Wall Street, the Dow Jones Industrial Average closed down 280.83 points, or 0.9%, at 31,874.57, around 400 points higher than earlier lows. The S&P 500 fell 27.36 points, or 0.7%, at 3,891.93 but the Nasdaq Composite rose 5.90 points, or 0.1%, at 11,434.05.
On Wednesday the Swiss central bank said that capital and liquidity levels at the ailing bank were adequate but stressed it was ready to make liquidity available to the institution if needed.
We welcome the statement of support issued by the Swiss National Bank and the Swiss Financial Market Supervisory Authority FINMA https://t.co/BlAFf83LU0
— Credit Suisse (@CreditSuisse) March 15, 2023
"Credit Suisse meets the higher capital and liquidity requirements applicable to systemically important banks. In addition, the SNB will provide liquidity to the globally active bank if necessary," the Swiss National Bank and Swiss financial regulator Finma said in a joint statement, after a turbulent day in which the bank's market value fell below USD7 billion.