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(Alliance News) - Stock prices in London were set to open lower on Monday after the sale of Credit Suisse to UBS failed to convince markets that the banking sector turmoil has been contained.
UBS will take over its troubled Swiss rival Credit Suisse for USD3.25 billion following crunch talks on Sunday aimed at stopping the stricken bank from triggering a wider international banking crisis.
"The lawmakers are trying their best at this stage to put off fires that are in their backyards, and the purpose is to quell any potential crisis that is threatening their banking sector," said Naeem Aslam at Zaye Capital Markets.
The Swiss government said the deal, involving Switzerland's biggest bank taking over the second-largest, was vital to prevent irreparable economic turmoil spreading throughout the country and beyond.
Similarly, the US banking regulator struck a deal to sell most of the assets of the failed Signature Bank to another institution, the agency said on Sunday.
Signature Bank was seized by the Federal Deposit Insurance Corp a week ago after it imploded in the wake of the collapse of Silicon Valley Bank earlier in March. The FDIC is seeking a similar deal to sell off parts of SVB, according to Bloomberg.
The US Federal Reserve and other major central banks are making a coordinated effort to improve banks' access to liquidity. The special drive will be launched on Monday by the Fed and the central banks of Canada, the UK, Japan, the EU and Switzerland.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: "The next few hours of trading will give us a better picture on whether the crisis is contained."
In early UK corporate news, Intertek appointed a new chief financial officer. Water sector regulator Ofwat announced new powers that will enable it to stop the payment of dividends by water utilities.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 105.10 points, or 1.4%, at 7,230.30
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Hang Seng: down 3.2% at 18,899.52
Nikkei 225: closed down 1.4% at 26,945.67
S&P/ASX 200: closed down 1.4% at 6,898.50
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DJIA: closed down 384.57 points, 1.2%, at 31,861.98
S&P 500: closed down 43.64 points, 1.1%, at 3,916.64
Nasdaq Composite: closed down 86.76 points, 0.7%, at 11,630.51
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EUR: flat at USD1.0664 (USD1.0665)
GBP: firm at USD1.2178 (USD1.2168)
USD: lower at JPY131.17 (JPY132.12)
Gold: higher at USD1,997.80 per ounce (USD1,957.76)
(Brent): lower at USD70.84 a barrel (USD73.43)
(changes since previous London equities close)
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ECONOMICS
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Monday's key economic events still to come:
11:00 CET EU foreign trade
10:00 EDT US retail trade
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France's central bank chief sought to distance European and French banks from the problems at Credit Suisse and banking woes in the US. Credit Suisse and the banking problems in the US "don't concern French and European banks", Francois Villeroy de Galhau, a member of the European Central Bank's governing council, told France Inter radio.
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BROKER RATING CHANGES
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UBS raises Glencore to 'buy' (neutral) - price target 560 pence
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JPMorgan places Whitbread on 'positive catalyst watch'
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Jefferies raises Dunelm to 'hold' (underperform) - price target 1,250 (560) pence
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COMPANIES - FTSE 100
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Intertek announced the promotion of Colm Deasy to CFO. Deasy replaces Jonathan Timmis who has stepped down from the product testing, inspecting and certification firm with immediate effect, with no reason provided by the company for his departure. Deasy joined Intertek in 2016 as treasurer, it said, and most recently was president Global TT, B&C & People Assurance. Intertek noted that trading remains in-line with expectations and the annual guidance it gave at the end of February.
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COMPANIES - FTSE 250
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Supermarket Income REIT said it sold its interest in the Sainsbury's Reversion Portfolio. The sale was completed on Friday, as expected. The real estate investment trust received GBP279.3 million for the first tranche of the total GBP430.9 million consideration. Supermarket Income said it has used part of the proceeds to repay, in full, a GBP202.8 million debt facility.
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FirstGroup extended the current arrangements for its West Coast partnership rail contract with the UK Department for Transport. The arrangements were set to expire on March 31 and have now been extended to October 15, "broadly" under the same terms and conditions, the public transport provider said. The contract comprises of the operation of Avanti West Coast and the shadow operation of the HS2 programme. FirstGroup added that discussions are ongoing with the UK DfT regarding a longer-term National Rail contract for the West Coast partnership.
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OTHER COMPANIES
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UK water services regulator Ofwat announced new powers that will enable it to stop the payment of dividends by water utilities if they would "risk the company's financial resilience". It said it would also take enforcement action against water companies that don't link dividend payments to performance. Ofwat said the change will requite company board to "take account of their performance" for customers and the environment when deciding to make dividend payments and will require companies to "maintain a higher level of overall financial health". "These changes to company licences reduce the risks that a company's poor financial health may pose to customer interests and its ability to invest to protect the environment. If the company falls short, Ofwat will be able to step in and take enforcement action," the regulator said. London-listed water utilities include United Utilities and Pennon.
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By Heather Rydings, Alliance News senior economics reporter
Comments and questions to newsroom@alliancenews.com
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