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London open
London stocks slumped in early trade on Friday following heavy losses on Wall Street, as investors mulled better-than-expected UK GDP data and looked ahead to the release of the non-farm payrolls report.
At 0820 GMT, the FTSE 100 was down 1.6% at 7,757.56. In the US, the Dow closed 1.7% lower, while the S&P 500 and the Nasdaq slid 1.9% and 2.1% respectively, as bank shares tumbled.
The selloff was sparked by tech-focused bank SVB Financial, which plummeted 60% after it announced plans to raise more than $2bn in capital to help offset losses on bond sales.
Looking ahead to the rest of the day, the payrolls report for February is due at 1330 GMT, along with the unemployment rate and average earnings.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said: “A catalyst for upwards movement in global markets would be a weaker US jobs report today, which would act as a clear marker that core inflation could start to come down in the US.
“While the February jobs report is expected to show that hiring slowed from January’s large gain, a strong report will put further pressure on equities. The market could be spooked if it believes rates could reach the 6% mark, which would deepen recession fears and is a large reason we’ve seen US financials come under heavy pressure in recent trading.”
On home shores, data out earlier from the Office of National Statistics showed that the UK economy returned to growth in January, raising hopes that a recession will be avoided.
GDP grew 0.3% on the month following a 0.5% contraction in December, coming in ahead of consensus expectations for 0.1% growth.
Growth was driven by the services sector, which expanded 0.5% after a 0.8% contraction in December. The biggest contributors were education, transport and storage, human health activities, and arts, entertainment and recreation activities, all of which rebounded after falls in December.
ONS director of economic statistics, Darren Morgan, said: “The economy partially bounced back from the large fall seen in December. Across the last three months as a whole and, indeed over the last 12 months, the economy has, though, showed zero growth.
“The main drivers of January’s growth were the return of children to classrooms, following unusually high absences in the run-up to Christmas, the Premier League clubs returned to a full schedule after the end of the World Cup and private health providers also had a strong month.”
Morgan said postal services also partially recovered from December’s strikes, although this was somewhat offset by a notable drop in construction.
Ruth Gregory, deputy chief UK economist at Capital Economics, said that looking beneath the surface, the figures suggest the economy is on weaker ground than it appears. “The rise was largely a reflection of the fewer number of strikes than in December,” she said. “This meant that a lot of the falls in output in December were reversed.”
In equity markets, banks were the standout losers, with HSBC, NatWest, Standard Chartered and Lloyds all sharply lower.
Transport operator FirstGroup was in the red despite lifting annual guidance as passenger traffic on its buses and trains continued to recover from Covid pandemic levels.
Housebuilder Berkeley Group also fell as it backed its outlook for 2023.
Schroders was under the cosh after a downgrade to ‘neutral’ from ‘outperform’ at Credit Suisse, while Segro was hit by a downgrade to ‘equalweight’ at Barclays.
Outside the FTSE 350, recruiter Robert Walters ticked higher as it reported record profits, driven by the tight labour market and surging wage inflation, as it announced that its long-standing chief executive was stepping down.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Bt Group Plc | +1.32% | +1.95 | 149.25 |
| 2 |  |
Vodafone Group Plc | +1.17% | +1.15 | 99.85 |
| 3 |  |
National Grid Plc | +0.96% | +10.00 | 1,053.50 |
| 4 |  |
Centrica Plc | +0.42% | +0.45 | 106.65 |
| 5 |  |
Sse Plc | +0.41% | +7.00 | 1,733.00 |
| 6 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 7 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 8 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
| 9 |  |
Rsa Insurance Group Ld | +0.00% | +0.00 | 684.20 |
| 10 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Hsbc Holdings Plc | -5.46% | -33.90 | 587.20 |
| 2 |  |
Standard Chartered Plc | -4.49% | -34.80 | 740.20 |
| 3 |  |
Carnival Plc | -4.44% | -34.40 | 739.60 |
| 4 |  |
Barclays Plc | -4.26% | -6.96 | 156.46 |
| 5 |  |
Legal & General Group Plc | -3.91% | -10.30 | 252.90 |
| 6 |  |
Rolls-royce Holdings Plc | -3.76% | -5.94 | 152.10 |
| 7 |  |
Intercontinental Hotels Group Plc | -3.63% | -206.00 | 5,462.00 |
| 8 |  |
Ashtead Group Plc | -3.59% | -206.00 | 5,530.00 |
| 9 |  |
Schroders Plc | -3.59% | -17.20 | 461.90 |
| 10 |  |
3i Group Plc | -3.55% | -58.00 | 1,576.00 |
US close: Stocks fall ahead of Friday’s payrolls
Wall Street stocks closed lower on Thursday, as traders awaited the release of key employment data scheduled for release on Friday.
The Dow Jones Industrial Average fell 1.66% to close at 32,254.86 and the S&P 500 dropped 1.85% to end the day at 3,918.32.
Meanwhile, the tech-heavy Nasdaq Composite slipped 2.05% to finish at 11,338.35.
In currency markets, the dollar fell against its major peers, trading down 0.04% on the pound at £0.8383, and decreasing 0.14% against the euro to €0.9438.
The greenback also declined on the yen by 0.18% to change hands at JPY 135.90.
“The back-and-forth week continues, as signs of some weakness in US employment data prompted hopes that perhaps Powell’s hawkishness earlier in the week was misplaced,” said IG chief market analyst Chris Beauchamp.
“US markets’ poor performance this year versus Europe has seen some bargain-hunting take place, and notably the Nasdaq 100 is back to where it was before the Fed chairman’s testimony earlier in the week.
“Most investors of course are now waiting to see how tomorrow’s jobs data plays out, which will set the stage for US inflation next week.”
Jobs data mixed ahead of Friday’s nonfarm payrolls
The number of jobless claims in the US increased unexpectedly last week, according to data from the Department of Labor.
In seasonally-adjusted terms, initial unemployment claims rose by 21,000 to reach 211,000 in the week ending on 4 March, surpassing economists’ forecast of 195,000.
The four-week moving average, which smooths out weekly volatility, also rose by 4,000 to reach 197,000.
Meanwhile, secondary unemployment claims, which refer to those not filed for the first time and referencing the week ending on 25 February, increased by 69,000 to reach 1.718 million.
The prior week’s reading for secondary claims was revised down by 6,000 to 1.655 million.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, conceded that it was the biggest rise since late November, but added that some of the rise was likely the result of “severe” weather in the upper Midwest and California – which would not last.
“The bigger picture here is that claims remain very low and range-bound. That said, the latest data from Challenger, released earlier today, show that the number of layoffs announced in January and February was the highest since 2009, and nearly double the pre-Covid trend.
“This will take time to filter through to the claims data, but we expect to see a clear and sustained increase by the spring.”
Indeed, staffing agency Challenger, Gray and Christmas revealed that layoff announcements in the US had hit their highest level since 2009 at the beginning of the year.
In February, US firms announced 77,770 job cuts, which was a 24% decline compared to the previous month.
However, the year-to-date layoff announcements reached 180,713, more than quadrupling compared to the same period in 2022.
The figure was also the highest recorded for the two months combined since the 428,000 job cuts announced in January and February.
Silvergate Bank wind-down has knock-on effects
In equities, shares of Silvergate Capital Corporation plummeted by 42.16% after the company announced its plan to liquidate its crypto-friendly lender Silvergate Bank and wind down operations.
That decision had a knock-on effect on Signature Bank, whose shares fell by 12.18% in response to Silvergate Bank’s closure.
Meanwhile, General Motors experienced a decline of 4.88% after the announcement of a voluntary buyout programme that would involve offering all of its US-based office staff voluntary redundancy.
The move was expected to result in an employee separation charge of $1.5bn for the automaker.
Friday newspaper round-up: EY, HS2, Arrival
Deloitte’s chief executive has launched a thinly veiled criticism of rival EY after its controversial plans to split the business into two were thrown into turmoil. EY initially announced plans for a radical breakup of its global operations last year, that would separate its audit and advisory businesses. – Guardian
HS2 will be delayed by another two years and major roadbuilding schemes will be mothballed, ministers have confirmed, after soaring inflation added billions to the cost of transport infrastructure projects. Ministers insisted they remained committed to Britain’s high-speed rail network scheme, but the budget constraints have cast further doubt over prospects for the rail project’s full implementation. – Guardian
With spring approaching, Bill Quan is preparing to plant this year’s crop of potatoes and peas at his Herefordshire farm. Yet there is a key difference on the field this year. Between the last harvest and the beginnings of the next one, Quan has kept the soil healthy using a mixed-species cover crop. Not only does this add nitrogen and allow the earth to hold more water, it also sucks up carbon dioxide from the atmosphere and sequesters it in organic matter. – Telegraph
A struggling electric vehicle start-up founded in Britain has said it is in line to strike a deal that will bolster its finances, despite making losses of up to $1 billion last year. Losses at Arrival widened to at least $587.6 million in the last quarter of 2022 alone, from $66.6 million the previous year, as it grappled with impairment charges and write-offs tied to decisions to close its British operation, switch to the United States and halt development in Russia. – The Times
Britain is set to become a “significantly worse place to do business” as corporation tax rises and investment incentives expire, new research suggests. The combination of corporate profits being taxed at 25 per cent and the end of the so-called super-deduction tax break will push the UK from tenth place to 33rd out of 38 leading economies in terms of the competitiveness of its business tax regime, the Centre for Policy Studies has warned. – The Times
