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FTSE 100 closers higher as banks rally, US stocks advance; Fed and BoE rate decisions up next

Last updated: 16:45 21 Mar 2023 GMT, First published: 06:59 21 Mar 2023 GMT

London
  • FTSE 100 closes 132 points higher
  • Wall Street awaits Wednesday's Fed rate decision
  • Janet Yellen says US banking sector is "stabilsing"

4.45pm: FTSE 100 closes higher

Banks led a recovery on the FTSE 100 as regulators and officials provided further vocal support for the sector, with London's blue-chip index ending the session 1.8% higher at 7,536 points.

“While the problems at SVB and Credit Suisse had been dealt with, markets had remained edgy. But today’s comments about supporting the banking sector have provided the solid foundation for more gains in risk assets,” commented IG's Chris Beauchamp.

“There is still the chance that the Fed will deliver a hawkish message tomorrow, but traders are betting that the risk of such a statement and move could deliver a killer blow to the rally,” he added. “As such, tomorrow’s meeting is the real hurdle for markets to navigate, but a dovish Fed could open the floodgates for further upside, even given the unsettling events of the past two weeks.”

At the UK close, US stocks were also higher, with the Dow Jones Industrial Average trading 0.6% up at 32,430, the S&P 500 gaining 0.7% to 3,980 and the Nasdaq adding 0.9% to 11,780.

3.50pm: Don't forget the BoE

Although tomorrow's Federal Reserve policy announcement is undoubtedly the focus, there is also UK inflation news and then Thursday's Bank of England interest rate announcement to be weathered, with neither central bank decision likely to be completely benign given the current banking turmoil.

Jane Foley, senior FX Strategist at RaboResearch commented: "It is our view that the BoE will announce a 25 bp rate hike this week. Ahead of the policy announcement, the UK February CPI inflation data will be released. While it would appear that price pressures have peaked in the UK, the market consensus expects February CPI inflation at 9.9% y/y, which is still almost five times above the BoE’s 2% inflation target. 

"While economic factors such as tight labour market conditions and better-than-expected growth projections argue in favour of further monetary policy tightening, policy makers will have to make an assessment as to whether the transmission of monetary policy has altered relative to previous expectations.  While the authorities appear to have done a good job in issuing reassurances about the financial sector, if bank lending is affected by the crisis such that a more rapid tightening in credit conditions results, a slowdown in inflation pressures could be seen." 

Foley added: "Ahead of the recent financial sector tensions, the question of whether the BoE could be approaching a pause in policy had already been raised in the market.  BoE Chief Economist Pill had raised the topic of overtightening given the extent of the policy moves already announced this cycle.  The BoE can be expected to offer further reassurances around the banking sector this week. Given the current uncertainties, there may be little by way of forward guidance on policy."

3.35pm: Sing it loud

Global recorded music revenues rose 9% last year to $26.2 billion, according to a report from the IFPI, a trade body for the recorded music industry, with growth registered in every region and an increase in paid subscription streaming helping drive sales.

Among the trends highlighted by the IFPI were China nudging into the top five markets globally for the first time, and income from the use of recorded music in adverts, film, television and games, rising by 22.3%.

Revenues from CDs, vinyl and other physical formats rose 4% to $4.6 billion, a slower rate than 2021's growth of 16.1%, which was boosted by a post-pandemic recovery, the IFPI Global Music Report said.

Subscription audio streaming revenues rose 10.3% to $12.7 billion, IFPI noted, adding there were 589 million users of paid subscription accounts by end-2022. Overall, streaming accounted for 67% of total recorded music revenues.

Global music revenues enjoyed their eighth consecutive year of growth. Total streaming, which includes both paid subscription and advertising-supported, increased 11.5% to $17.5 billion.

Also boosting growth were rising performance rights revenues which increased by 8.6%, returning to pre-pandemic levels. Only downloads and other non-streaming digital formats saw revenues decline, falling 11.7%.

Revenues in Europe rose 7.5%, while USA & Canada saw gains of 5.0%. US revenues, the world’s single biggest market, gained 4.8%, exceeded $10 billion for the first time.

3.15pm: US home prices ease

Ahead of the crucial Federal Reserve interest rate decision tomorrow, the latest US data saw existing-home prices fall year-on-year in February for the first time in 11 years, as a dip in mortgage rates caused home sales to surge from January levels.

The national median existing home price fell 0.2% in February from a year earlier to $363,000, the first year-over-year decline since February 2012, the US National Association of Realtors said Tuesday. Median prices are down 12.3% from their record $413,800 in June.

Sales of previously owned homes, which make up most of the housing market, rose 14.5% in February from the prior month to a seasonally adjusted annual rate of 4.58 million, breaking a 12-month run of declines, NAR said. February sales fell 22.6% from a year earlier.

The data saw Wall Street ease back a touch from earlier highs, with the Dow Jones Industrials Average now ahead 244 points, or 0.7% at 32,489, while the broader S&P 500 added 0.8%, and the tech-laden Nasdaq Composite was up 0.7%.

2.55pm: Crude recovery

Heavyweight oil stocks added their strength to the FTSE 100 advance, with Shell and BP both ahead 3%, helped by firmer crude prices, which extended a recovery from the 15-month low hit the previous session, as worries eased about the global banking sector risks that could hit economic growth and reduce fuel demand.

Brent crude was up 1.1% at $74.58 a barrel, while US West Texas Intermediate (WTI) gained 2.1% at $69.03.

A fall by the US dollar index after hitting a five-week low in the previous session also helped as a weaker greenback can support oil demand because it makes the commodity cheaper for buyers holding other currencies.

OPEC+ sources told Reuters the recent drop in prices reflects banking fears rather than a worsening supply and demand balance. A meeting of ministers from OPEC+, which includes the members of the OPEC, plus Russia and other allies, is scheduled for April 3.

The focus for investors is now tomorrow's Federal Reserve decision on interest rates after its latest two-day meeting. Since the banking woes began last week, markets have lowered projections for the next US rate hike to 25 basis points (bps), down from previous expectations of a 50 bps increase.

2.30pm: Good news energy

Energy bills will fall below £2,000 from July, Investec analysts have predicted, as wholesale gas prices in Europe continue to fall.

The analysts expect Ofgem’s price cap, which determines how much suppliers can charge per unit of energy, will fall to £1,981 from July and then to £1,966 in October for the average household on an annual basis. This is a fifth lower than Investec's previous forecast for July, where it estimated Ofgem would set the cap at £2,478.

Ofgem’s lower cap will largely come as the result of falling gas prices, which sat at 96p per British thermal unit on Tuesday, down from an August peak of 640p, though network, policy and supplier operating costs also play a part.

Investec analyst Martin Young said the cheaper price cap, forecast to reach its lowest level since April 2022, was welcome but was still far higher than households are used to paying.

He added people may be tempted to switch to fixed rates to avoid volatile markets hiking bills again this winter, but also suggested he expected more “innovative tariffs” to be launched.

“We need to be cognisant of the fact that when any annual estimate starts with a two, that’s still much higher than typical households are used to paying,” Young said. “Some people will just want a fix for that piece of mind.”

2.15pm: Wall Street well-bid

The FTSE 100 held close to strong session highs in afternoon trading as US stocks started the day in positive fashion as banking stocks rallied after fears over the crisis caused by the recent collapses of Silicon Valley Bank and Signature Bank and the rescue of Credit Suisse dissipated, with the focus switching to the US Federal Reserve's latest two-day monetary policy meeting starting today.

Around 45 minutes after the New York open, the Dow Jones Industrials Average was up 0.8%, or 249 points at 32,492, while the broader S&P 500 gained 0.9%, and the tech-laden Nasdaq Composite rose 1.0%.

US regional banks were lifted by comments from Treasury Secretary Janet Yellen Tuesday morning, suggesting that the government is would provide further guarantees of deposits if the banking crisis worsens. First Republic Bank shares gained about 33% to $16.18.

"Stock markets are bouncing back on Tuesday as some calm returns following the UBS takeover of Credit Suisse and traders look ahead to the Fed tomorrow," said Craig Erlam, senior market Analyst UK & EMEA at OANDA. "It's been a wild couple of weeks and while I, along with everyone else, am hopeful that the worst is behind us, I can't say I'm particularly confident. The response to recent events has been impressive from central banks, regulators, and governments, and while we can commend them for their firefighting skills, only time will tell if they've been successful in extinguishing the flames."

 In London, around 2.15pm, the FTSE 100 index was 130 points, or 1.7% stronger at 7,532.

1.30pm: Some of the top risers and fallers

Manx Financial Group (AIM:MFX) plc shares surged back toward their all-time high on 28.6p after the company reported a 70% increase in profits for the past year.

The owner of Conister Bank and an assortment of lending, leasing, broking and financial advice firms said its financial performance represented a record year, despite the economic backdrop.

Shares in UK and Australia-listed MGC Pharmaceuticals Ltd (LSE:MXC, OTC:MGCLF, ASX:MXC) jumped 25% in London after a positive session down under – which at one point saw the stock soar 57%.

The catalyst was the listing by the US Food & Drug Administration of its Covid treatment ArtemiC as an over-the-counter drug.

United Oil & Gas PLC (AIM:UOG) shares jumped as much as 10% after reporting the start of production from the ASH-8 development well at the Abu Sennan licence onshore Egypt.

Luceco PLC (LSE:LUCE) saw its shares fall almost 9% after the wiring accessories and EV chargers group reported revenues down by 20% and profits flopped by almost a third.

Although analysts at Liberum, the corporate broker, pointed out that the numbers were actually at the top end of guided expectations as it raised its price target to 155p and repeated its ‘buy’ recommendation.

Shares in Pressure Technologies PLC (AIM:PRES) fell 7% to 38.65p on Tuesday morning after a review of accounting policies led to the company forecasting a wider loss for the financial year 2022.

1.00pm: US stocks seen higher ahead of FOMC meeting

Wall Street is expected to open higher as volatility in the banking sector dissipates and investors look to the Federal Reserve’s two-day rate-setting meeting starting today for further direction.

Futures for the Dow Jones Industrial Average rose 0.8% in Tuesday pre-market trading while those for the broader S&P 500 index gained 0.7% and contracts for the Nasdaq-100 added 0.4%.

US stocks finished Monday in positive territory as regional banks rebounded on the news UBS would be buying troubled Swiss lender Credit Suisse. At the close, the DJIA had added 1.2% to 32,245, the S&P 500 was up 0.9% at 3,952 points and the Nasdaq Composite was up 0.4% at 11,676 points.

“The clouds are parting and glimpses of blue sky are giving hope to investors after a chaotic few weeks. With no new troubles in the banking sector for the past 24 hours, markets are hoping that’s a sign the crisis could have peaked,” commented Russ Mould, investment director at AJ Bell. “The key question is whether this is the calm before the storm."

"The Federal Reserve’s next interest rate decision tomorrow still has the potential to kick up a fuss if the market thinks it is being too aggressive with rate rises," Mould added. "Investors’ nerves are already frail, and it wouldn’t take much to disturb the peace on the markets seen today.”

Markets are pricing in around a 70% chance of a quarter percentage point rate hike on Wednesday with a 30% chance of no change in what is shaping up to be one of the most uncertain decisions of the current rate hiking cycle, noted Victoria Scholar, head of investment at interactive investor.

“Monetary policymakers are weighing up the extent of the lingering inflationary pressures versus the potential deflationary impact of the banking crisis following SVB’s collapse and Credit Suisse’s takeover,” Scholar said. “The US dollar is languishing near five-week lows, reflecting the uncertainty around this week’s Fed decision.

12.22pm: UBS sees one more UK rate rise despite banking turmoil

On Thursday, policymakers at the Bank of England (BoE) will decide whether to increase interest rates or keep them on hold.

At this stage, UBS thinks it is hard to have any confidence about which way they will go, evidenced by the fact that markets are pricing a 50/50 chance of either outcome.

“The only thing we can be certain of is that it will be a split decision,” UBS said.

Recent speeches from policymakers show that those on the more hawkish (Catherine  Mann) and those on the dovish (Swati  Dhingra)  end of the spectrum are unlikely to change their views.

“So, we could see votes range from no hikes to a 50-basis-point  increase,” the Swiss investment bank suggested.

However, UBS stated it isn’t the outliers that will decide the final outcome, “for the core group, the call will likely be between staying on hold or opting for a 25bps hike.”

The arguments in favour of either decision are reasonably compelling, the bank noted.

As the chancellor said in his budget last week: The outlook for the UK economy has improved in recent months, but growth is unlikely to be what anyone would describe as good. We may dodge a technical recession, but it will still feel like one.  

To be sure, inflation has peaked and is set to fall rapidly, but it will be sometime before households start to see their incomes improve, let alone make up for the real-terms hit from last year’s surge in prices, economists at UBS wrote.

However, UBS also pointed out others will be keen to point out that while inflation is falling, it is still high, and measures of core inflation (excluding food and energy) are proving  stickier. 

"And then there is the tight labour market, keeping wage settlements high,” UBS added.

Then there is the elephant in the room, the recent “volatility” in the financial sector following the collapse of the US-based Silicon Valley Bank. How the BoE will handle this one is not clear-cut at all.

Nonetheless UBS expect the BoE will go ahead and hike on Thursday. “The bigger picture is that whatever they do, they’ll be on hold thereafter.”

The next round of central bank meetings comes around in May, and by then falling inflation and weak growth should be pretty evident, they suggested.

“It won’t be long before we start talking about interest rate cuts,” they concluded.

11.57pm: German investor confidence dropped in March

German investor confidence has dropped more than expected, ending a six-month run of improving economic sentiment after turmoil erupted in the banking sector, according to a monthly poll of market analysts.

The ZEW Institute’s gauge of investor expectations for Europe’s largest economy fell to 13, down from 28.1 in February, in the first sign of how hard the collapse of several US lenders and the forced rescue of Credit Suisse by UBS have hit market sentiment. Economists had expected a decline to 16.4.

“The international financial markets are under a lot of pressure,” said ZEW president Achim Wambach, adding that investors’ assessment of banks’ earnings had “deteriorated considerably” and their view of insurers’ prospects had also worsened.

Meanwhile the FTSE 100 is holding steady near session highs at 7,517.67, up 113.82 points, or 1.54%.

11.25am: US Treasury Secretary says US banks are "stabilising"

The US banking sector is "stabilising" after the recent failures of Silicon Valley Bank and Signature Bank rattled the industry, Treasury Secretary Janet Yellen will tell a summit Tuesday in remarks pre-released by the US Treasury.

“The situation is stabilising. And the US banking system remains sound,” she will say.

“The Fed facility and discount window lending are working as intended to provide liquidity to the banking system. Aggregate deposit outflows from regional banks have stabilised.”

“We are squarely focused on doing our job,” she will add. “And you should rest assured that we will remain vigilant.”

The collapses caused a crisis of confidence, with many customers of similarly sized banks withdrawing their money and depositing it in larger institutions, considered too big for the government not to bail them out if they faced failure.

"Our intervention was necessary to protect the broader US banking system," she will say in a speech to the American Bankers Association in Washington DC.

"And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion," she added.

10.50am: Ferrari hit by cyber attack

Ferrari (NYSE:RACE) has become the latest high-profile victim of cyber criminals. The luxury car maker said it was recently contacted by a threat actor with a ransom demand related to certain client contact details.

The Maranello, Italy-based company said it informed clients and notified customers of the potential data exposure and the nature of the incident and immediately started an investigation in collaboration with a leading global third-party cybersecurity firm as well as informing legal authorities.

"As a policy, Ferrari will not be held to ransom as paying such demands funds criminal activity and enables threat actors to perpetuate their attacks," the company said in a statement.

The company has further reinforced its systems and is confident in their resilience.

"We can also confirm the breach has had no impact on the operational functions of our company," Ferrari said.

Back in London and the FTSE is motoring along, now at 7,511.02, up 107.17 points, or 1.45%.

10.40am: Rolls-Royce and Fortum ink SMR joint venture

Finland's Fortum and Rolls-Royce Holdings PLC (LSE:RR.)'s SMR division will jointly explore opportunities to deploy small modular nuclear reactors (SMR) in Finland and in Sweden, Fortum said in a statement on Tuesday.

Fortum last year launched a two-year nuclear study of SMRs as well as conventional large reactors in Finland and Sweden, and is also working with French EDF, Swedish Karnfull Next and Finnish Helen in addition to Rolls-Royce SMR.

Last week Rolls-Royce said it welcomed the government’s new commitment to small modular reactors (SMRs) in the UK, especially given it is the only manufacturer.

Chancellor Jeremy Hunt announced financial support for the prospective mini nuclear reactor industry in his spring budget on Wednesday, including a commitment to co-fund projects that get approved.

“Rolls-Royce SMR has called for rapid progress from the government and we welcome the adoption of that principle in this process,” the FTSE 100-listed company told Proactive.

Shares in Rolls-Royce jumped 4.6% to 147.44p in London on Tuesday morning.

10.22am: Pimco and Invesco to take hit from Credit Suisse bond wipeout

Pacific Investment Management and Invesco are among the largest holders of Credit Suisse's so-called additional tier 1 or AT1 bonds that have been wiped out after the bank's takeover by UBS.

California-based asset manager Pimco is the largest holder of the Swiss lender's AT1 bonds with around US$807mln of the securities, Bloomberg reported.

The Credit Suisse notes are set to fall to zero and were quoted at prices of a few cents on the dollar on Monday.

Because of the extraordinary government support, the takeover is set to trigger a complete write-down of 16 billion Swiss francs (£14bn) of the bank's AT1 bonds in order to increase core capital.

Pimco also holds almost US$3bn of Credit Suisse senior bank bonds, some of which have risen by around 25 cents on the euro on Monday compared to Friday’s levels, sources said. 

Elsewhere, Invesco holds around US$370mln of Credit Suisse's AT1 debt.

BlackRock's AT1 exposure at the end of February was around US$113mln. BlackRock has reportedly reduced some of its holdings in recent weeks. 

10.00am: First Republic shares up 23% in pre-market

One of the banks at the centre of the banking turmoil could be set for a brighter day. Shares in the troubled US  lender First Republic Bank are up 23% in pre-market trading on hopes of a rescue deal.

The latest attempt to secure the bank's future is reportedly being led by JP Morgan boss Jamie Dimon.

Dimon, a veteran of previous banking rescues (Bear Stearns and Washington Mutual in 2008), held talks with the chief executives of other major banks about how to shore up First Republic’s finances.

The Wall Street Journal explained: "The discussions, while preliminary, have focused on how the industry could arrange for an investment that would boost the bank’s capital, according to people familiar with the matter."

"Among the options on the table, the people said, is an investment in First Republic by the banks themselves," the report.

Back in London and the FTSE 100 is close to best levels for the day at 7,510.03, up 106.18 points, or 1.43%.

9.35am: Stick or twist?

Will the Federal Reserve pause or not pause was the question posed by Neil Wilson at markets.com.

He noted that despite the apparent relief in financial markets uncertainty is still in charge. "What we are seeing is that once events take over, policymakers are left with zero good options," he suggested.

"The Federal Reserve faces a dilemma and one of the most difficult decisions in years – it can hike or it can pause or even cut."

He reckoned the Fed will take the ECB’s cue and raise, though it may refrain from a full 50bps and prefer 25bps.

He pointed out markets price in a roughly 83% it goes for this move, with around a 17% chance of no hike. 

The two-day meeting kicks off today with the statement and policy announcement tomorrow.  

Wilson doesn't think the Fed "blinks unless we see a lot more turmoil in the next day, which seems unlikely." 

But he noted it will be months before now the true extent of the fallout and damage of the last fortnight.

"We are now firmly into the discussions about what the Fed calls ‘long and variable lags’ of monetary policy," he said.

8.57am: Buoyant mood continues 

The more buoyant mood continues with the FTSE 100 now up 1.3% in touching distance of 7,500. Other European markets joined in the fun with the Dax in Frankfurt up 1.3% and the Cac-40 in Paris up 1.2%.

Banks continue to rally with Barclays PLC (LSE:BARC), up 4.1%, and NatWest Group PLC (LSE:NWG) up 4% top of the FTSE 100 risers with Lloyds Banking Group PLC (LSE:LLOY), up 3.1%, not far behind.

A rise in the oil price supported oil majors, BP PLC (LSE:BP.) and Shell PLC (LSE:SHEL, NYSE:SHEL), up 2.4% and 2.2% respectively. Crude prices had fallen sharply as the banking turmoil gripped markets on fears of an economic slowdown.

Attention now switches to the Fed’s two-day meeting which starts today.

Victoria Scholar, head of investment, interactive investor said: “Markets are pricing in around a 70% chance of a quarter percentage point rate hike on Wednesday with 30% chance of no change in what is shaping up to be one of the most uncertain decisions of the current rate hiking cycle.”

Elsewhere Balfour Beatty jumped 2.6% as Jefferies raised its price target to 425p from 400p.

“On 10% yield, its reduced risk order book, shareholder friendly capital allocation policy and attractive geographic footprint looks undervalued, the broker said. Jefferies reiterated a ‘buy’ rating on the stock.

8.33am: Moody's downgrades outlook for UBS to negative

Banking shares continue to recover across Europe. Deutsche Bank AG rose 3.3%, Commerzbank AG advanced 3.2%, BNP Paribas advanced 3.1% and UBS gained 3.4%. 

However, Moody’s has downgraded its outlook for Swiss bank UBS to negative, following a similar move yesterday by fellow rating agency S&P.

The downgrades follow the bank’s agreement at the weekend to acquire embattled rival Credit Suisse for US$3.25bn. The takeover is expected to result in tens of thousands of job losses.

In a note on Tuesday, Moody’s pointed to the “significant” challenges facing UBS. These included the “need to retain key [Credit Suisse] personnel while the transaction is under way; the need to minimise the loss of overlapping clients in its Swiss banking and wealth management businesses; and the need to unify the cultures of two somewhat different organisations.”

But the credit ratings agency said the acquisition has the potential over time “to significantly enhance UBS's franchise in wealth management, Swiss banking, asset management and to a lesser degree in investment banking, whilst targeting a reduction of operating costs by more than US$8bn.”

8.15am: FTSE 100 continues to regain ground

The FTSE 100 opened higher on Tuesday as relative calm returned to financial markets after the banking turmoil and investors switched attention to monetary policy moves either side of the pond.

At 8.15am London’s lead index was up 58.62 points, or 0.8%, at 7,462.47 while the FTSE 250 rose to 18,647.20, up 152.07 points, or 0.82%.

Banks make strong progress. Lloyds Banking Group PLC (LSE:LLOY) rose 2.3%, NatWest Group PLC (LSE:NWG) gained 2.6%, and Standard Chartered PLC firmed 1.4%.

The FOMC kicks off its two-day meeting today with the interest rate decision tomorrow while the Bank of England will make its call on Thursday with both decisions uncertain in light of the recent volatility in financial markets.

"Markets have become increasingly divided as to what the FOMC may well do when it comes to interest rates tomorrow, with opinions split between another 25bps hike, a pause, and a 25bps rate cut," said Michael Hewson, chief market analyst at CMC Markets.

"Assuming recent gains hold, and we get no further surprises then the odds still favour a 25bps rate rise, otherwise, the Fed runs the risk that it sends the message it is more concerned about financial stability than it is about its fight against inflation

Kallum Pickering at Berenberg noted the picture on UK rates has changed materially in light of events in the banking sector. “After highlighting the downside risks last week, we now expect the BoE to hold the bank rate at 4.0% at its policy meeting on Thursday,” he said.

Public finances were in the spotlight with government borrowing in February of £16.7bn, £9.7bn more than February 2022 and the highest February borrowing since monthly records began in 1993, largely because of substantial spending on energy support schemes.

Figures from the Office for National Statistics showed in the financial year-to-February 2023, the public sector borrowed £132.2bn, £15.5bn more than in the same period last year and the third highest financial year-to-February borrowing since monthly records began in 1993.

Public sector net debt (PSND ex) at the end of February 2023 was £2,507.3bn or around 99.2% of gross domestic product (GDP), with the debt-to-GDP ratio at levels last seen in the early 1960s.

Despite the record high the EY ITEM Club said “February's outturn left public sector net borrowing on track to come in well below the Office for Budget Responsibility's full year forecast of £152.4bn.”

Kingfisher PLC (LSE:KGF) rose 2.5% in early exchanges as full year profit beat City expectations despite falling compared to the previous year. There were also signs the sales were stabilising with a modest rise in current year performance.

Richard Hunter at interactive investor said: “These latest numbers show some signs of faltering growth, admittedly compared to a strong set of comparatives from last year.”

But he added, “the immediate outlook is marginally more positive, with the group reporting an increase of 0.5% in February like-for-like sales, while the company is relaxed with expectations for its profit figures in the new financial year.” 

7.57am: UK borrowing hits record in February as energy support spend ramps up

Public sector net borrowing in February was £16.7bn, £9.7bn more than February 2022 and the highest February borrowing since monthly records began in 1993, largely because of substantial spending on energy support schemes.

Central government debt interest payable was £6.9bn in February, £1.3bn less than February 2022; the recent large movements are because of the effect of Retail Prices Index (RPI) changes on index-linked gilts.

In the financial year-to-February 2023, the public sector borrowed £132.2bn, £15.5bn more than in the same period last year and the third highest financial year-to-February borrowing since monthly records began in 1993.

Public sector net debt (PSND ex) at the end of February 2023 was £2,507.3bn or around 99.2% of gross domestic product (GDP), with the debt-to-GDP ratio at levels last seen in the early 1960s.

PSND excluding the Bank of England was £2,215.7bn or around 87.7% of GDP, which was £291.5bn less than the wider measure.

7.48am: Profit falls at Kingfisher but in line with guidance

European home improvement retailer Kingfisher reported a 20% fall in full-year profit and forecast a further fall in its new financial year.

The group, which owns B&Q and Screwfix in the UK Britain and Castorama and Brico Depot in France and other markets, said adjusted pre-tax profit totalled £758mln in the year to January 31 at the top of guidance but down from £949mln reported in the same period in 2021-22.

Sales rose 0.7% on a constant currency basis to £13.06bn, with like-for-like sales down 2.1%. Earnings per share fell to 23.8p from 40.3p and the dividend was left unchanged at 12.40p.

The FTSE 100-listed firm said it was comfortable with analysts' average forecast for adjusted pre-tax profit in 2023-24 of £633mln.

It said it was seeing resilient underlying sales trends in its new financial year, with February like-for-like sales up 0.5%

Kingfisher plans 25 new Screwfix stores in France and up to 60 new stores in the UK & Ireland the current financial year and is targeting up to 80 medium-box and compact store openings in Castorama Poland over five years.

7.00am: FTSE 100 seen higher, investors eye FOMC meeting

The FTSE 100 is expected to open higher extending Monday’s gains as the banking sector shows signs of stabilising and investors switch attention to monetary policy moves in the US and the UK.

Spread betting companies are calling London’s lead index by around 32 points.

US stocks advanced on Monday as the rescue of Credit Suisse allayed fears about bank contagion, while investors weighed odds of the Federal Reserve pausing its rate hikes this week.

On Wall Street, the Dow Jones Industrial Average closed up 382.60 points, or 1.2%, at 32,244.58. The S&P 500 gained 34.93 points, or 0.9%, at 3,951.57 and the Nasdaq Composite advanced 45.02 points, or 0.4%, at 11,675.54.

The Federal Open Market Committee kicks off its two-day meeting today with the interest rate decision tomorrow.

"Markets have become increasingly divided as to what the FOMC may well do when it comes to interest rates tomorrow, with opinions split between another 25bps hike, a pause, and a 25bps rate cut," said Michael Hewson, chief market analyst at CMC Markets.

"Assuming recent gains hold, and we get no further surprises then the odds still favour a 25bps rate rise, otherwise, the Fed runs the risk that it sends the message it is more concerned about financial stability than it is about its fight against inflation. A rate cut would send an even worse message that the Fed sees something the market doesn't and could spook already jittery markets even further."

In Asia, the Tokyo market was closed on Tuesday for the Vernal Equinox holiday. The Shanghai Composite was up 0.6%, while the Hang Seng index in Hong Kong was up 0.9%.

In London, full year results are due from DIY retailer Kingfisher while a trading statement is due from online food retailer Ocado.

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