LONDON MARKET CLOSE: Lingering bank fears cap blue-chip gains

(Alliance News) - Oil stocks and miners pushed London's FTSE 100 higher on Tuesday, as the turmoil from the past fortnight in the banking sector abated.

Cautious afternoon trade, which saw blue-chip benchmarks in Europe briefly fall into the red, suggests markets are still nervy, however.

The FTSE 100 index closed up 12.48 points, 0.2%, at 7,484.25 on Tuesday in London. The FTSE 250, however, lost 123.93 points, 0.7%, at 18,396.69. The AIM All-Share ended down 6.03 points, 0.8%, at 792.45.

The Cboe UK 100 ended up 0.1% at 748.52, the Cboe UK 250 lost 0.8% at 15,999.99, and the Cboe Small Companies fell 0.7% to 13,203.86.

In mainland Europe, the CAC 40 in Paris closed up 0.2%, while the DAX 40 in Frankfurt inched up 0.1%.

"European markets have struggled for direction today, with upward pressure on short term yields serving to act as a modest drag on the markets ability to build solidly on the gains seen yesterday. There still appears to be an abundance of caution when it comes to driving prices higher, in the wake of the turmoil of last week, with outperformance from the basic resources and energy sector offsetting weakness in commercial real estate, helping to keep the FTSE 100 in positive territory," CMC Markets UK analyst Michael Hewson commented.

Eyes were also on testimonies from central banks. Bank of England Governor Andrew Bailey and Federal Reserve Vice Chair for Supervision Michael Barr talked up the strength of the UK and US banking systems.

US central banker Barr in prepared remarks on Tuesday said the nation's banking system is "sound and resilient".

"The Federal Reserve, working with the Treasury Department and the Federal Deposit Insurance Corp, took decisive actions to protect the US economy and to strengthen public confidence in our banking system. These actions demonstrate that we are committed to ensuring that all deposits are safe. We will continue to closely monitor conditions in the banking system and are prepared to use all of our tools for any size institution, as needed, to keep the system safe and sound," Barr told the US Senate committee on banking, housing, and urban affairs.

Meanwhile, the Bank of England governor said the fall of Silicon Valley Bank was the fastest collapse since Barings failed in 1995, but the UK banking system is not in the same position as during the 2008 financial crisis.

Bailey told members of Parliament on the Treasury Committee that the UK economy is in a "period of very heightened tension and alertness".

Bailey said on Tuesday: "In my past 30 years, talking about the parent bank in the US to start with, Silicon Valley Bank saw the fastest passage from health to death really since Barings. That was a Friday to Sunday thing and this was pretty similar. The US authorities are still dealing with some of the consequences of the issues and the issues with regional banks which we saw with SVB.

"My very strong view about the UK banking system is that it is in a strong position both capital and liquidity-wise, it is not showing signs of problems in that respect and we have tested very extensively."

Sterling was quoted at USD1.2339 late Tuesday afternoon, up from USD1.2268 at the London equities close on Monday. The euro traded at USD1.0839, higher than USD1.0782. Against the yen, the dollar was quoted at JPY130.98, down versus JPY131.50.

Stocks in New York were mixed. The Dow Jones Industrial Average rose 0.2% and the S&P 500 lost 0.2%, while the Nasdaq Composite fell 0.6%.

In London, shares in Shell and BP rose 1.4% and 2.3%, supported by a rise in crude prices.

Brent oil was trading at USD78.09 a barrel late Tuesday, up from USD75.91 from the London equities close on Monday.

In addition, BP announced a plan to form a joint venture with Abu Dhabi National Oil Co to focus on gas development in areas of mutual interest, including the east Mediterranean.

As part of this, the two firms have offered to take NewMed Energy private.

Energean shares rose 9.1% on the back of the deal, as the M&A move lifted investor sentiment towards the sector.

Miners also rose, as fears for the global economy from a possible banking crisis ebb. Glencore rose 2.1%, Anglo American added 1.1% and Rio Tinto climbed 2.0%.

Putting pressure on the FTSE 250 index, Synthomer fell 12%, and Irn-Bru owner AG Barr dropped 6.1%.

Chemicals firm Synthomer said it swung to an annual pretax loss of GBP47.6 million, compared to a profit of GBP283.9 million a year before. Revenue from continuing operations rose 11% to GBP2.38 billion from GBP2.14 billion.

Synthomer said it was continuing to see "subdued levels of demand across most of [its] end markets and geographies", but expected things to improve in the second half.

Cumbernauld, Scotland-based AG Barr said annual revenue rose 18% in the financial year that ended on January 29 to GBP317.6 million from GBP268.6 million the year before.

Pretax profit rose 5.2% to GBP44.4 million from GBP42.2 million, as adjusted pretax profit increased by 13% to GBP43.5 million from GBP38.4 million a year earlier.

For financial 2024, AG Barr expects operating margins to be hit by its investments, as well as cost inflation, and the "initial dilutive impact" from the Boost acquisition. However, the company said it remains confident of delivering further revenue and profit growth in the year ahead in line with board expectations.

Team17 fell 8.8%. It reported a yearly profit fall and said its chief executive will step down once a replacement is found.

The video game development company and publisher of educational entertainment apps for children said a search to replace Debbie Bestwick has begun. Bestwick will move to a non-executive role when a new CEO is appointed.

In 2022, the company's revenue jumped 52% to GBP137.4 million from GBP90.5 million in 2021, but pretax profit slipped 1.4% to GBP28.7 million from GBP29.1 million. Team17 noted GBP9.2 million in one-off acquisition-related costs, up sharply from GBP1.6 million in 2021.

Gold was quoted at USD1,967.14 an ounce late Tuesday afternoon, down ever-so-slightly from USD1,956.69 late Monday.

Wednesday's economic calendar has a German consumer climate survey at 0700 BST. The UK corporate diary has annual results from retailer Next and advertising firm S4 Capital.

By Eric Cunha, Alliance News news editor

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