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London open: Stocks edge lower; HSBC buys SVB’s UK arm
London stocks edged lower in early trade on Monday as investors mulled news that HSBC has bought the UK arm of stricken Silicon Valley Bank for a nominal £1, and looked ahead to this week’s Budget.
At 0830 GMT, the FTSE 100 was down 0.4% at 7,716.57.
The acquisition took place after a night of frantic negotiations involving government ministers and Bank of England officials.
Talks were held over the weekend on a private sale of SVB UK and a plan to help depositors in the lender in an effort to avoid a state bailout. US regulators on Sunday evening said that SVB’s American depositors would have access to all of their money on Monday.
“This acquisition makes excellent strategic sense for our business in the UK. It strengthens our commercial banking franchise and enhances our ability to serve innovative and fast-growing firms, including in the technology and life-science sectors, in the UK and internationally,” said HSBC chief executive Noel Quinn.
Chancellor Jeremy Hunt said customer deposits at SVB UK will be protected, with no taxpayer support through the rescue deal with HSBC.
Victoria Scholar, head of investment at Interactive Investor, said: “HSBC’s acquisition of SVB UK is a welcomed development for its depositors and the wider banking system. It means that SVB UK will avoid insolvency proceedings and its customers will be able to access deposits and banking services as normal from today.
““It will be interesting to see whether the start-up friendly style of lending offered by SVB and not the larger more traditional banking behemoths, will continue to be possible under the HSBC umbrella.”
Several companies issued statements on Monday to say they had no material exposure to SBV UK, including online card and gifts retailer Moonpig, media group Future and Auction Tech.
Away from the SVB drama, insurer Direct Line was under the cosh after saying it swung to a full-year loss as it took a hit from inflation, and warning that 2023 earnings will be impacted by higher-than-expected claims inflation in the motor business.
In the year to the end of December 2022, the company swung to a pre-tax loss of £45.1m from a profit of £446m the year before, while operating profits slumped 94.6% to £32.1m. Analysts had been expecting operating profit of £70m.
Direct Line pointed to elevated motor claims inflation, higher-than-expected weather event claims, new regulatory changes and ““challenging” investment markets.
Elsewhere, British American Tobacco was knocked lower by a downgrade to ‘neutral’ at JPMorgan.
Top 10 FTSE 100 Risers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Fresnillo Plc | +1.14% | +8.20 | 730.40 |
| 2 |  |
Morrison (wm) Supermarkets Plc | +0.00% | +0.00 | 286.40 |
| 3 |  |
Evraz Plc | +0.00% | +0.00 | 82.68 |
| 4 |  |
Rsa Insurance Group Ld | +0.00% | +0.00 | 684.20 |
| 5 |  |
London Stock Exchange Group Plc | +0.00% | +0.00 | 8,620.00 |
| 6 |  |
Standard Life Aberdeen Plc | +0.00% | +0.00 | 274.10 |
| 7 |  |
Micro Focus International Plc | +0.00% | +0.00 | 532.00 |
| 8 |  |
Royal Bank Of Scotland Group Plc | +0.00% | +0.00 | 120.90 |
| 9 |  |
Reckitt Benckiser Group Plc | +0.00% | +0.00 | 6,498.00 |
Top 10 FTSE 100 Fallers
| Sponsored by Plus500 |
|
| # | Name | Change Pct | Change | Cur Price | |
|---|---|---|---|---|---|
| 1 |  |
Direct Line Insurance Group Plc | -6.56% | -11.00 | 156.65 |
| 2 |  |
Standard Chartered Plc | -3.87% | -28.60 | 711.20 |
| 3 |  |
Tui Ag | -3.75% | -58.00 | 1,487.00 |
| 4 |  |
Melrose Industries Plc | -3.75% | -6.10 | 156.40 |
| 5 |  |
Itv Plc | -3.62% | -3.08 | 82.08 |
| 6 |  |
Carnival Plc | -3.57% | -26.60 | 717.80 |
| 7 |  |
Lloyds Banking Group Plc | -3.57% | -1.78 | 48.00 |
| 8 |  |
Barclays Plc | -3.49% | -5.50 | 151.92 |
| 9 |  |
International Consolidated Airlines Group S.a. | -3.41% | -5.06 | 143.20 |
| 10 |  |
Ashtead Group Plc | -3.40% | -188.00 | 5,344.00 |
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.
Monday newspaper round-up: Barclays, British Land, Saudi Aramco
Barclays could save itself more than £200m a year after deciding to take a break from paying into its staff pension scheme, despite the fund’s assets plummeting by £10bn in 12 months. Barclays last month declared profits of £7bn for 2022, but its “contribution holiday” means the cost of the payments it would normally make towards former employee’s retirement benefits will now have to be met by the pension scheme – prompting anger among some ex-staff. – Guardian
A stack of factory-made modular labs, with a roof terrace and grass growing on top, has sprung up at Canada Water in south-east London and is due to open in late May. With growing demand for lab space, the company behind them, British Land, is unveiling plans for a large new research building on Monday, part of a nascent life sciences cluster south of the Thames. – Guardian
The chief executive of Wagamama has said chain restaurants will never be as ubiquitous as they were pre-pandemic, but insisted they will not disappear from Britain’s high streets altogether. Andy Hornby, chief executive of The Restaurant Group, which owns the Japanese chain, told The Telegraph: “I don’t think the [casual dining] industry will ever be quite as big as it was.” – Telegraph
The world’s biggest oil producer has reported annual profits of $161.1 billion after prices surged over the past year, eclipsing the record earnings made by its peers. Saudi Aramco also cited higher volumes sold and improved margins for refined products as it became the latest energy multinational to outline record earnings. – The Times
The former technology chief of Bulb has launched a new venture that aims to sign up energy suppliers to use the failed company’s customer service platform. John Marshall is now chief executive of Zoa, which is controlled by the London-listed Sequoia Economic Infrastructure Income Fund, a secured creditor to Bulb that has taken control of its technology assets as part-repayment for a loan. – The Times
