10th Mar 2023 07:48
(Alliance News) - Stocks in London were called to open sharply lower on Friday, amid fears over the health of the US banking sector.
Investor sentiment worldwide was rocked overnight, prompted by a sell-off in US banking stocks.
The four largest US banks saw their stock prices lose a cumulative USD52 billion on Thursday, as the financial sector digested trouble at SVB Financial, a major Silicon Valley-focused lender.
Shares of SVB Financial plummeted 60% on Thursday and continued to fall in after-hours trading, following an announcement the prior evening that it had lost USD1.8 billion in sales of securities to raise funds. SVB's disclosure came on top of an announcement the same day that crypto banking firm Silvergate plans to shut down in the face of cryptocurrency market turmoil.
Trading also was nervous ahead of the latest US non-farm payrolls print on Friday at 1330 GMT.
According to FXStreet-cited expectations, the US economy is expected to have added 205,000 jobs in the last month. In January, 517,000 jobs were added.
"Soft, and ideally softer-than-expected, jobs data from the US today could reset the Fed rate hike expectations back to a 25bp hike, whereas another set of strong jobs data will likely cement the idea of a 50bp hike from the Fed later this month, send the US yields and the US dollar up, and equities down," said Swissquote Bank's Ipek Ozkardeskaya.
In data out early Friday in London, the UK economy grew by 0.3% in January, after December's 0.5% decline.
In early UK company news, housebuilder Berkeley Group said trading has continued in the same vein since its last update, while transport provider FirstGroup raised its annual profit outlook after seeing higher volumes in its second half.
Here is what you need to know at the London market open:
FTSE 100: called down 101.8 points, 1.3%, at 7,778.18
Hang Seng: down 2.9% at 19,346.83
Nikkei 225: closed down 1.7% at 28,143.97
S&P/ASX 200: closed down 2.4% at 7,138.20
DJIA: closed down 543.54 points, 1.7%, at 32,254.86
S&P 500: closed down 1.9% at 3,918.32
Nasdaq Composite: closed down 2.1% at 11,338.35
EUR: flat at USD1.0584 (USD1.0580)
GBP: flat at USD1.1924 (USD1.1926)
USD: up at JPY136.77 (JPY136.29)
Gold: up at USD1,830.51 per ounce (USD1,827.92)
Oil (Brent): down at USD81.19 a barrel (USD83.15)
(changes since previous London equities close)
Friday's key economic events still to come:
08:30 EST US employment report
The UK economy grew slightly faster than expected at the beginning of 2023, according to the Office for National Statistics. Gross domestic product grew by 0.3% in January, according to an ONS estimate, having shrunk by 0.5% in December. FXStreet-cited market consensus had expected a 0.1% rise in GDP. The growth was led by the services sector, offsetting declines in construction and production output.
An extra 356,000 UK mortgage borrowers could face payment difficulties by the end of June 2024, in addition to those who are already behind, according to the City regulator. This has been reduced from a previous estimate made last September that an additional 570,000 mortgage borrowers could become financially stretched by the end of June 2024, the Financial Conduct Authority said.
BROKER RATING CHANGES
Barclays cuts Segro to 'equal weight' (overweight) - price target 800 (900) pence
Credit Suisse cuts Schroders to 'neutral' (outperform) - price target 470 (510) pence
COMPANIES - FTSE 100
London and South East England-focused housebuilder Berkeley Group said trading was in line with the levels outlined back in December, when sales from the end of September were around 25% lower than the first five months of its financial year, which ends in April. It reaffirmed targets of pretax profit of GBP600 million for the year, with at least USD1.05 billion in aggregate to follow over the next two years. Cash due on exchanged forward sales is anticipated to be above GBP2.0 billion at year-end, down slightly from GBP2.17 billion a year before. "This is a resilient performance in the context of the market volatility since the end of September," the firm said.
COMPANIES - FTSE 250
FirstGroup raised its expectations for its financial year, which ends March 25. The transport provider said this was due to an improved performance driven by higher volumes of passengers in its second half. "The increase in demand has partially resulted from the GBP2 bus fare cap scheme introduced in England in January," it noted, as well as Scottish funding for free bus travel for under-22s. Driver resource pressures also eased in certain locations, following a recruitment drive and high staff retention. FirstGroup now expects adjusted operating profit and adjusted attributable profit for financial 2023 to be ahead of its previous expectations.
Robert Walters announced a year of double-digit percentage growth, with its eponymous chief executive set to depart after 38 years leading the firm. The recruitment company said revenue rose 13% to GBP1.10 billion in 2022 from GBP970.7 million in 2021, while pretax profit increased 11% to GBP55.6 million from GBP50.2 million. It proposed a final dividend of 17.0 pence, up from 15.0p. CEO Robert Walters will retire at the firm's annual general meeting in April, passing the reins to Toby Fowlston. Fowlston joined the group back in 1999, and most recently served as CEO for its global recruitment brands of Robert Walters and Walters People. "Having worked closely with Toby over the last few years in particular, I am confident that the group is in safe hands and will continue to go from strength-to-strength in the years to come," Walters said.
By Elizabeth Winter, Alliance News senior markets reporter
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