London close: Stocks rise as banking fears ebb

London’s equity markets turned in a positive performance by the close on Monday, as concerns over the global banking sector took a back seat.

The FTSE 100 was up 0.9% to finish at 7,471.77 points, while the FTSE 250 index rose 0.19% to end the session at 18,529.62.

Monday began with a positive mood on the weekend news that First Citizens Bank agreed to buy the deposits and loans of Silicon Valley Bank, which collapsed earlier in the month.

The US Federal Deposit Insurance Corporation (FDIC), which had taken over SVB, said the transaction included the purchase of around $72bn of Silicon Valley Bridge Bank's assets at a discount of $16.5bn.

It also said that it received equity appreciation rights in First Citizens BancShares common stock with a potential value of up to $500m.

First Citizens opened the 17 former branches of Silicon Valley Bridge Bank under its own banner on Monday.

HSBC purchased the UK arm of SVB a fortnight ago for £1, in a deal struck with the Bank of England and the Financial Conduct Authority.

On the currency front, sterling was up 0.38% on the dollar at $1.2279, while it strengthened 0.12% against the euro to last trade at €1.1380.

“Last week seemed to point towards renewed volatility thanks to the banking sector’s troubles, but these have vanished for the time being,” said IG chief market analyst Chris Beauchamp.

“Stocks have begun the final week of Q1 on a more positive note - the lack of any more headlines about Deutsche Bank have been a big relief for investors, although nervousness still persists.”

Beauchamp did warn, however, that a recession was still “the broad expectation” for the end of the year, given recent turmoil.

“What promises to provide volatility is the divergence in the market’s and the Fed’s views of when rates will come down.

“Normally April sees stocks pick up steam in their move higher, but this seems like a much dicier prospect this year.”

Retail sales hold steady as outlook improves

In economic news, retail sales held steady in March according to the latest CBI distributive trades survey.

The survey showed that retail sales volumes were largely unchanged in the year to March, with a weighted balance of one, compared to February's two.

It also indicated that retailers expected sales to increase at a moderate pace next month, with a balance of nine, compared to March's -18.

That marked the first positive growth expectation since September last year, with a balance of 12 believing sales were good for the time of year, up from February's six.

Retailers also expected sales to exceed seasonal norms to a broadly similar extent next month.

“March’s survey suggests a gradual recovery in retail sales is beginning to take hold,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.

“The sales for the time of year balance, which has a slightly better relationship with the official data than the main balance, is now well above its average of -2 in the prior 35 years.”

However, Tombs also sounded a note of caution, saying many households were likely to prioritise accumulating savings, which they had run down over the last year, over spending more.

“It likely won’t be until energy bills fall sharply in the third quarter that a material recovery in retail sales emerges.”

On the continent, meanwhile, German business sentiment showed an unexpected improvement in March according to the Ifo Institute.

The business climate index rose to 93.3 from 91.1 in February, surpassing consensus expectations of 91.0 and marking the fifth consecutive monthly increase in the index.

Ifo’s expectations gauge also increased, to 91.2 from 88.4, while the current situation index was recorded at 95.4 in March, up from 93.9 in February.

The manufacturing index significantly improved to 6.6 in March from 1.5 in February, and the service sector gauge rose to 8.9 from 1.3.

“Sentiment improved considerably, especially in key areas of manufacturing such as the automotive, chemical, electrical and electronics, and machinery and equipment industries,” said Ifo president Clemens Fuest.

Banking plays, energy giants lead the gains in London

Banks and oil giants were among the risers on London’s equity markets, after the former tumbled on Friday due to fears reignited by a spike in Deutsche Bank’s credit default swaps.

Barclays, HSBC Holdings, and Lloyds Banking Group all gained by the close, with Barclays rising by 2.32%, HSBC by 1.33%, and Lloyds by 1.32%.

Elsewhere, oil giants BP and Shell were high risers as oil prices advanced.

Brent crude futures were last up 2.53% on ICE at $76.89 per barrel, with BP rising 2.08%, and Shell ahead 1.45% at the end of the day.

Shares in cruise line operator Carnival closed flat, having surged earlier on a smaller-than-expected first-quarter loss and above-forecasted revenue, driven by robust demand for leisure travel and on-board spending.

On the downside, miner Rio Tinto was still in the red after data released overnight showed China's industrial profits slumped by 22.9% in the first two months of the year, as the effects of Covid curbs continued to take their toll.

Rio Tinto Group closed down 0.4%.

Precious metals miner Fresnillo also lost its shine as gold prices slipped, losing 1.53%.

In broker note action, Royal Mail owner International Distributions Services was a big loser after JPMorgan slashed its price target on the shares to 250p from 285p, resulting in a decline of 4.43% for the stock.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 7,471.77 0.90%
FTSE 250 (MCX) 18,529.62 0.19%
techMARK (TASX) 4,532.82 0.61%

FTSE 100 - Risers

3i Group (III) 1,609.00p 4.31%
Ocado Group (OCDO) 452.10p 2.94%
Barclays (BARC) 137.00p 2.32%
BP (BP.) 496.40p 2.08%
Melrose Industries (MRO) 161.00p 1.96%
Barratt Developments (BDEV) 449.20p 1.79%
Associated British Foods (ABF) 1,951.50p 1.75%
Burberry Group (BRBY) 2,383.00p 1.71%
GSK (GSK) 1,423.60p 1.60%
Glencore (GLEN) 449.60p 1.56%

FTSE 100 - Fallers

Fresnillo (FRES) 721.40p -1.53%
Smiths Group (SMIN) 1,685.00p -1.46%
BT Group (BT.A) 139.00p -0.54%
SEGRO (SGRO) 717.20p -0.53%
Diageo (DGE) 3,583.00p -0.44%
United Utilities Group (UU.) 1,035.50p -0.43%
Kingfisher (KGF) 255.20p -0.43%
Rio Tinto (RIO) 5,232.00p -0.40%
Phoenix Group Holdings (PHNX) 547.00p -0.33%
Severn Trent (SVT) 2,807.00p -0.32%

FTSE 250 - Risers

Harbour Energy (HBR) 256.20p 4.49%
IWG (IWG) 150.25p 4.05%
TI Fluid Systems (TIFS) 99.70p 2.68%
Wetherspoon (J.D.) (JDW) 677.50p 2.65%
Bank of Georgia Group (BGEO) 2,595.00p 2.57%
National Express Group (NEX) 120.50p 2.55%
IntegraFin Holding (IHP) 260.20p 2.44%
JTC (JTC) 678.00p 2.41%
TBC Bank Group (TBCG) 2,210.00p 2.31%
Keller Group (KLR) 663.00p 2.31%

FTSE 250 - Fallers

CMC Markets (CMCX) 184.20p -20.60%
International Distributions Services (IDS) 220.20p -4.43%
Centamin (DI) (CEY) 99.30p -4.01%
Clarkson (CKN) 3,070.00p -3.31%
Bakkavor Group (BAKK) 105.00p -3.14%
Auction Technology Group (ATG) 613.00p -3.01%
ASOS (ASC) 723.50p -2.95%
Helios Towers (HTWS) 102.00p -2.67%
Ascential (ASCL) 247.60p -2.37%
Fidelity China Special Situations (FCSS) 242.00p -2.22%