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(Alliance News) - Stock prices in London were deep in the red at midday on Friday as London-listed banks weighed down the FTSE 100 following a steep sell-off of peers across the Atlantic on Thursday.
The market also was showing nerves ahead of the US non-farm payrolls report at 1330 GMT. Signs of labour market strength would be read as bad news for markets, as it may embolden the US Federal Reserve to carry out a more aggressive hike to interest rates at its March meeting.
The FTSE 100 index was down 128.49 points, or 1.6%, at 7,751.49. The FTSE 250 was down 359.01 points, or 1.8%, at 19,333.89, and the AIM All-Share was down 13.16 points, or 1.6%, at 836.51.
The Cboe UK 100 was down 1.7% at 775.89, the Cboe UK 250 was down 2.0% at 16,952.21, and the Cboe Small Companies was down 1.7% at 16,952.21.
The pound was quoted at USD1.2002 at midday on Friday in London, higher compared to USD1.1926 at the close on Thursday.
Helping lift the pound was fresh data from the Office for National Statistics on Friday morning that showed the UK economy grew slightly faster than expected at the beginning of 2023.
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 just a 0.1% rise in GDP.
In London, banks were amongst the worst performers at midday after signs of trouble at a major US lender sparked concerns about the wider banking sector.
HSBC lost 4.7%, Standard Chartered 3.6%, Barclays 3.5%, NatWest 2.8%, and Lloyds 2.9%.
Shares of Silicon Valley-focused lender 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.
The massive drop rippled through the financial sector, with the biggest US bank, JPMorgan Chase, ending the day down 5.4%. Bank of America and Wells Fargo both fell 6.2%, while Citigroup lost 4.1%. In pre-market trade on Friday, JPMorgan and BoA both were down a further 0.3%. Wells Fargo and Citigroup both were down 0.4%.
Russ Mould, investment director at AJ Bell, explained that in a heavily interconnecting industry like banking it is "not so easy" to compartmentalise these sorts of events, which "often hint at vulnerabilities in the wider system".
"Lots of banks hold large portfolios of bonds and rising interest rates make these less valuable. The SVB situation is a reminder that many institutions are sitting on large unrealised losses on their fixed-income holdings," he said.
In the FTSE 250, FirstGroup rose 1.9% as it raised its expectations for its full-year thanks to an improved performance in its second half, driven by higher volumes of passengers.
The transport company explained that First Bus passenger volumes increased to 83% of financial 2020 equivalent levels, meaning before the Covid-19 pandemic, while commercial and concessionary volumes were at 87% and 75% of pre-pandemic levels, respectively.
Consequently, FirstGroup now expects adjusted operating profit for financial 2023, which ends on March 25, to be ahead of its previous expectations. Adjusted operating profit is expected at GBP137.4 million in financial 2023. For financial 2022, adjusted operating profit stood at GBP226.8 million.
Elsewhere in London, Robert Walters climbed 2.6% after it announced a year of double-digit percentage growth, and said its eponymous chief executive is set to depart after 38 years of leading the firm.
The recruitment firm 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.
Chief Executive Officer Robert Walters will retire at the firm's annual general meeting in late 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.
On AIM, Aferian plunged 45% after saying it expects annual revenue and adjusted earnings before interest, tax, depreciation and amortisation to be "substantially below" previous expectations, due to challenges at its Amino division.
The business-to-business video streaming solutions company said its Amino business, which connects Pay TV to streaming services, saw a decline in revenue in the second half of 2022, as customers delayed orders in order to run down their existing inventories.
It explained this trend has continued longer than expected, with Amino's recovery now not anticipated until later in the financial year.
Consequently, Aferian said it expects Amino's outturn for the full year ending 30 November to be substantially lower than originally anticipated, knocking the wider firm's revenue and earnings for the year.
In European equities on Friday, the CAC 40 in Paris was down 1.3%, while the DAX 40 in Frankfurt was down 1.5%.
Annual inflation in Europe's largest economy was steady at 8.7% in February, Destatis confirmed on Friday, unchanged from the month prior, though still at a high level.
The inflation rate was expected to cool to 8.5%, according to FXStreet.
The euro stood at USD1.0595 midday Friday, higher against USD1.0580 at the London equities close on Thursday. Against the yen, the dollar was trading at JPY136.84, higher compared to JPY136.29.
Stocks in New York were called largely lower. The Dow Jones Industrial Average was called down 1.7% and the S&P 500 index down 0.2%. The Nasdaq Composite is called up 0.1%. The Dow closed down 1.7% on Thursday, the S&P down 1.9% and the Nasdaq down 2.1%.
Brent oil was quoted at USD81.02 a barrel at midday in London on Friday, down from USD83.15 late Thursday. Gold was quoted at USD1,835.37 an ounce, sharply higher against USD1,827.92.
By Heather Rydings, Alliance News senior economics reporter
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