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LONDON MARKET MIDDAY: Banking nerves return as Credit Suisse slides

17th Mar 2023 12:06

(Alliance News) - European equities succumbed to late-morning selling pressure on Friday, as fear of a banking crisis mounted again, with Credit Suisse shares in the red once more.

Miners and oil companies supported the FTSE 100 and ensured it outperformed continental peers, but Wall Street was called to open lower.

The FTSE 100 index was down just 0.26 of a point at 7,409.77 early on Friday afternoon. For the week as a whole, it is down 4.4%.

The FTSE 250 was down 50.97 points, 0.3%, at 18,707.61, and the AIM All-Share was down 1.38 points, 0.2%, at 812.69.

The Cboe UK 100 traded flat at 741.36. The Cboe UK 250 fell 0.5% to 16,260.15. The Cboe Small Companies traded 0.2% lower at 13,472.64.

In mainland Europe, the CAC 40 in Paris was down 0.4%, while the DAX 40 in Frankfurt slipped 0.1%.

Stocks in New York were pointed to negative open. The Dow Jones Industrial Average was indicated down 0.4% and the S&P 500 down 0.3%. The Nasdaq Composite was set to open slightly lower.

In Zurich, Credit Suisse was down 7.9% early Friday afternoon, giving back some of Thursday's 19% share price jump in Zurich. Credit Suisse's value has fallen by a quarter so far this week. Over the past 12 months, the stock is 74% in the red.

"Right now, the market's fortunes appear to be tied to a prime slice of Zurich real estate which houses what seems to be Europe's sickliest big bank," AJ Bell analyst Russ Mould commented.

Credit Suisse and UBS are opposed to the idea of a merger at the behest of the Swiss government, Bloomberg reported late Thursday.

UBS would prefer to go it alone and not pick up risks related to Credit Suisse, Bloomberg reported, citing people with knowledge of the matter.

AJ Bell's Mould added: "Whether the efforts on the part of the Swiss government to prop up the bank prove sufficient, whether Wall Street's injection into troubled regional institution First Republic overnight works, and whether there are any other vulnerable banks are likely to remain key considerations for investors. The dreaded c-word, contagion, certainly remains in the air."

The European Central Bank will hold talks on the state of banking in the eurozone on Friday amid worries caused by the failure of two US lenders.

The meeting, the second of its kind this week, was not previously scheduled but is a common step in reaction to fast-moving developments in the banking sector.

The ECB on Thursday stuck to a planned half-percentage-point interest rate increase despite the market turmoil over fears of a widening banking crisis.

European policymakers had faced calls to slow their aggressive hiking campaign after the collapse of Silicon Valley Bank and Signature Bank in the US, the sector's biggest failures since the 2008 financial crisis.

Elsewhere in the banking sector, China's central bank announced a cut to the amount of cash that banks are required to hold in reserve. It is the first such cut this year, in a move by the People's Bank of China to shore up an economy weakened by the pandemic.

It brings the weighted average ratio for financial institutions to around 7.6%. The rate was last cut in November, when the world's second-largest economy was being held back by strict Covid-19 curbs.

The pound was quoted at USD1.2119 midday Friday, firm on USD1.2110 late Thursday. The euro stood at USD1.0622, flat against USD1.0619. Against the yen, the dollar was trading at JPY132.64, down against JPY133.09.

Sterling and the euro fell from intraday highs of USD1.2176 and USD1.0669, respectively.

In London, Shell and BP rose 1.7% and 1.6%, tracking oil prices higher.

Brent oil was quoted at USD74.95 a barrel early Friday afternoon in London, rising from USD74.21 late on Thursday.

"Oil prices are stable today after suffering significant losses as investors worried about the financial crisis's spill over impact. We are still not out of the woods, and it would be incorrect to state that the financial crisis, which started with the collapse of Silver Gate and SVB, has ended, which is why traders are likely to struggle to compute the demand equation for oil. The OPEC summit, which is still a week away, is the most important event in terms of demand and supply for traders. So far, though, two big players, Saudi Arabia and Russia, have kept markets quiet by pledging to keep supplies under control," Zaye Capital Markets analyst Naeem Aslam commented.

Miners also were on the rise, with Glencore up 1.8%, Anglo American up 1.4% and Antofagasta up 0.5%.

BT dropped 3.4%, however. Its Openreach unit faced a setback in the planned launch of a new broadband plan.

Network cabling and wiring service provider Openreach plans to introduce a pricing plan for internet providers from April 1.

The UK regulator on Friday said it will need an additional two months for further analysis before issuing its final decision. The delay is due to a "number of detailed responses" to its consultation, "some of which raise issues which require further assessment", Ofcom said.

As a result, the planned launch of Equinox 2 on April 1 "would not be appropriate" until it has issued its final decision, Ofcom said.

Ofcom on Friday also published two exchanges between itself and BT Chief Executive Philip Jansen from February.

Writing to Ofcom Chief Executive Melanie Dawes, Jansen had sought to defend his comments in an article reported by the Financial Times in early February.

Jansen said several comments reported in the article entitled, "BT chief warns Openreach fibre push will 'end in tears' for rivals" were taken out of context. He told Dawes his comments also had been "explicitly" welcoming of competition on fibre building.

Elsewhere in London, Verditek added 23%. The solar panels maker signed an exclusive three-year supply agreement with Swedish company Lindab Profil.

While Lindab has no minimum purchasing obligations, and there is no guarantee that it will place any orders, Verditek has already supplied over EUR100,000 worth of panels to Lindab for a number of projects, it said.

Verditek shares are now higher than they were around mid-February, when it said its partner Bradclad Group ended a distribution agreement. Shares are still down by more than half since mid-October, however, when Verditek warned it could no longer be considered an "exclusive supplier" for Bradclad, given that the latter began working with another manufacturer.

Gold was quoted at USD1,934.58 an ounce midday Friday, up from USD1,918.22 at the London equities close on Thursday.

By Eric Cunha, Alliance News news editor

Comments and questions to [email protected]

Copyright 2023 Alliance News Ltd. All Rights Reserved.

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