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FTSE 100 up 1.5%, best rally of the year
After an upbeat morning, the London stock market is on track for its best day this year.
The FTSE 100 index of blue-chip shares is now up 121 points, or 1.6%, at 7524 points, as calm returns to the markets folloowing the takeover of Credit Suisse.
That would be the biggest one-day rise since 21st December last year, and lifts the index to its highest since last Wednesday (when fears over the crisis at Credit Suisse rocked global markets).
Engineering firm Rolls-Royce are the top riser, up 5.9%, followed by banks NatWest +5.6%) and Barclays (+4.7%).
Standard Chartered bank (+4.4%), and Lloyds Banking Group (+3.9%) are also lifting the market.
Bank shares nudged higher after Janet Yellen signalled that there could be more support for US bank deposits (see earlier post).
There is “broad relief” in the City today, reports Neil Wilson, chief markets analyst at Markets.com.
Wilson adds:
There’s a sense that we got through the hardest part with Monday’s volatility dialling down. Shares in London, Paris and Frankfurt rallied more than 1% again in early trading on Tuesday.
But, despite the apparent relief, ”uncertainty is still in charge” as investors ponder what the US Federal Reserve and the Bank of England will decide to do at their interest rate decisions this week.
Wilson says:
What we are seeing is that once events take over, policymakers are left with zero good options.
Key events
Just Eat Takeaway is reportedly laying off as many as 1,700 delivery drivers as the takeaway company grapples with a post-pandemic slowdown.
The Daily Telegraph has the details:
Bosses are understood to have informed impacted workers on Tuesday morning, with delivery drivers being offered six weeks’ notice with pay. The shake-up will also affect 170 full time Just Eat staff within its operations team.
The £3.5bn food delivery company, which is listed in London and Amsterdam, has been seeking to slash spending as takeaway order numbers plunge post-pandemic and families grapple with the cost-of-living crisis.
Total customer numbers fell by 9pc in 2022, the company said at its annual results earlier this month, while rising inflation means diners are spending about 3pc more on an average order.
FTSE 100 up 1.5%, best rally of the year
After an upbeat morning, the London stock market is on track for its best day this year.
The FTSE 100 index of blue-chip shares is now up 121 points, or 1.6%, at 7524 points, as calm returns to the markets folloowing the takeover of Credit Suisse.
That would be the biggest one-day rise since 21st December last year, and lifts the index to its highest since last Wednesday (when fears over the crisis at Credit Suisse rocked global markets).
Engineering firm Rolls-Royce are the top riser, up 5.9%, followed by banks NatWest +5.6%) and Barclays (+4.7%).
Standard Chartered bank (+4.4%), and Lloyds Banking Group (+3.9%) are also lifting the market.
Bank shares nudged higher after Janet Yellen signalled that there could be more support for US bank deposits (see earlier post).
There is “broad relief” in the City today, reports Neil Wilson, chief markets analyst at Markets.com.
Wilson adds:
There’s a sense that we got through the hardest part with Monday’s volatility dialling down. Shares in London, Paris and Frankfurt rallied more than 1% again in early trading on Tuesday.
But, despite the apparent relief, ”uncertainty is still in charge” as investors ponder what the US Federal Reserve and the Bank of England will decide to do at their interest rate decisions this week.
Wilson says:
What we are seeing is that once events take over, policymakers are left with zero good options.
Janet Yellen to signal further US support for deposits at smaller banks, if needed
US Treasury secretary Janet Yellen is expected to tell American bankers today that the US government could provide more backing for deposits at smaller American banks if needed.
Yellen is due to speak to an American Bankers Association conference. Excerpts of her prepared remarks show that she will say that the US banking system is stabilizing after “decisive and forceful” actions from regulators.
Earlier this month, US regulators guaranteed all deposits at failed banks Silicon Valley and Signature, above the industry-wide maximum of $250,000.
Yellen is expected to indicate that fresh action to protect bank depositors could be warranted if smaller institutions suffer deposit runs that threaten more contagion.
Remarks released by the US Treasury show that Yellen will say:
“The steps we took were not focused on aiding specific banks or classes of banks. Our intervention was necessary to protect the broader U.S. banking system.
And similar actions could be warranted if smaller institutions suffer deposit runs that pose the risk of contagion.”
Some banking groups have called for temporary universal guarantees on all US bank deposits, a step that requires approval by Congress under expedited procedures.
But, some Republican lawmakers oppose blanket deposit guarantees, warning that universal guarantees on all bank deposits would encourages future irresponsible behaviour.
Credit Suisse staff have experienced a mix of anger, surprise, tears and resignation over the takeover by UBS last weekend, Financial News report.
One investment banker contacted by Financial News said:
“I’ve cried twice in my career. One during my first week in investment banking when I thought ‘what the hell have I let myself into’, and once today.”
“Everyone is stunned by the speed of the downfall,” said another senior investment banker, adding:
“We are grasping for details — we know they are going to scale back, but we don’t know by how much.”
A third reports spending 60% of their time on work, and 40% doing their CV and reaching out to recruiters…..
Billionaire hedge fund manager Bill Ackman argues that the turmoil in the banking sector should encourage US central bankers to resist raising interest rates this week.
The Federal Reserve is due to set US interest rates tomorrow (6pm UK time), and economists had been expecting a quarter-point increase as it tries to cool inflation.
Ackman, though, argued overnight that the Federal Reserve should not put additional pressure on the system, as “financial stability is the Fed’s first responsibility”.
Ackman also cites the surprise decision to wipe out Credit Suisse’s AT1 bond holders, while paying 3bn Swiss francs to Credit Suisse’s shareholders, saying:
The Federal Reserve should pause on Wednesday.
We have had a number of major shocks to the system. Three US bank closures in a week wiping out equity and bond holders. The demise of Credit Suisse and the zeroing of its junior bondholders. Notably, bondholders bearing losses is a new phenomenon as they were protected in the GFC.
The @federalreserve should pause on Wednesday. We have had a number of major shocks to the system. Three US bank closures in a week wiping out equity and bond holders. The demise of Credit Suisse and the zeroing of its junior bondholders. Notably, bondholders bearing losses is a… https://t.co/rcksilgXYR
— Bill Ackman (@BillAckman) March 20, 2023
Investor morale in Germany has fallen this month, and by more than expected, the ZEW economic research institute has reported.
The institute’s economic sentiment index decreased to 13.0 from 28.1 in February. Economists had expected a smaller decline, to 17.1.
Concerns over the banking sector, and the financial markets, hit confidence this month.
ZEW president professor Achim Wambach explains:
“The international financial markets are under a lot of pressure. This currently high level of uncertainty is also reflected in the ZEW economic expectations.
The assessment of the banks’ earnings development has deteriorated considerably, but remains slightly positive. The assessments of the insurance industry are also declining significantly.”
The price of riskier bonds issued by European banks have strengthened this morning, as markets regain some confidence following the takeover of Credit Suisse.
AT1 bonds, which are designed to convert into equity in a crisis or be wiped out, are rallying. One, from UniCredit, has gained more than 3 cents, while others issued by Deutsche Bank and UBS have risen more than 2 cents, Reuters reports.
However, the gains only partially offset the hefty losses of 5 cents or more suffered on Monday.
European and UK regulators effectively rebuked the Swiss authoritires yesterday, for deciding to wipe out Credit Suisse’s AT1 bonds while preserving some value for shareholders. In the UK and Europe, they said, equity will still be first in the firing line before AT1 bonds.
Some holders of Credit Suisse AT1 bond-holders are considering legal action, over the decision to break the usual heirachy.
But in Switzerland, the bonds’ terms state that in a restructuring, the financial watchdog is under no obligation to adhere to the traditional capital structure.
Derby named new HQ of Britain’s rail network
As our transport correspondent Gwyn Topham exclusively reported yesterday, Derby has just been named as the new headquarters of Britain’s railways.
Derby was on a shortlist of six locations to become the official home of Great British Railways, alongside Birmingham, Crewe, Doncaster, Newcastle and York.
This is a big symbolic boost to Derby, although the new strategic body’s HQ will house a limited number of direct top-level railway jobs.
As Gwyn wrote yesterday:
Contenders to host GBR have had to demonstrate their railway heritage and also how the move could contribute to the government’s levelling up agenda.
Mark Harper, the UK’s transport minister, says Derby will become “the heart of Great Britain’s rail industry”.
Harper explains:
Among an exceptional list of shortlisted applicants, Derby scored highest in the Expression of Interest stage of the competition, which analysed its suitability against six published criteria: levelling up, connectivity, opportunities for GBR, value for money, heritage and public support.
It also scored highest in the six-week public vote, attracting 45,600 votes, more than 5,000 ahead of the second placed location in a total vote of 205,000.
First Republic shares up 20% in pre-market trading
Elsewhere in the banking sector, shares in troubled US lender First Republic Bank are up 20% in pre-market trading in New York, on hopes of a rescue deal.
Yesterday, First Republic’s shares tumbled by 47% amid reports that the San Francisco-based bank may need to raise more funds despite a $30bn (£24bn) rescue last week.
S&P Global cut its credit rating deeper into junk territory, adding to the pressure on First Republic.
But….JP Morgan boss Jamie Dimon was leading efforts to craft a rescue deal for First Republic last night.
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 explains:
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 gold price has dipped this morning, a day after hitting $2,000 per ounce for the first time in a year amid Monday’s nervous tradng.
Gold has slipped back to $1,967 per ounce, down 0.6% today.
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