LONDON MARKET CLOSE: Shares climb after another day of no bank frights

(Alliance News) - Stock prices in London closed higher on Thursday, as equities continued to rally on the belief that a banking crisis has been averted.

Blue-chip European remain off where they were on March 9, the day before equities suffered a melt-down following the collapse of Silicon Valley Bank. Equity markets are making a stellar recovery as the month draws to a close, however.

Riskier assets were on the up again in London, with retail and property firms among the FTSE 100's best-performers. Among mid-caps, a dramatic share price fall, then rise, for power generation firm Drax grabbed investor focus.

The FTSE 100 index added 56.16 points, 0.7%, at 7,620.43. The FTSE 250 surged 274.93 points, 1.5%, to 18,907.74. The AIM All-Share climbed 9.64 points, 1.2%, to 805.84.

The Cboe UK 100 ended up 0.9% at 761.98, the Cboe UK 250 added 1.7% at 16,506.30, and the Cboe Small Companies rose 0.2% to 13,276.39.

In European equities on Thursday, the CAC 40 in Paris surged 1.1%, while the DAX 40 in Frankfurt jumped 1.3%.

Equity markets have celebrated what has been a calm so far on the banking front. A slew of negative headlines in recent weeks, including the SVB failure and fears for Credit Suisse and Deutsche Bank have hurt markets.

This week has seen little to no unwelcome surprises, however.

Market confidence on Thursday meant there were broad-based gains for the FTSE 100 on Thursday. Property investor British Land added 4.2%, retailer JD Sports surged 4.3% and grocer Ocado jumped 9.4%.

Keeping a lid on the FTSE 100, were a handful of stocks that went ex-dividend. Among them were Aviva and Phoenix Group, falling 3.1% and 3.6%.

Away from banking sector calm, data from Europe and the US also lifted the mood on Thursday.

Inflation readings in Germany and Spain cooled, ahead of a wider eurozone reading on Friday.

In addition, a weaker reading of the US economy has added to hope that the Federal Reserve's hiking cycle may be nearing its end.

US economic growth for the fourth quarter of 2022 was downwardly revised, according to a third estimate from the Bureau of Economic Analysis on Thursday.

US gross domestic product expanded by 2.6% from the preceding quarter in the final three months of 2022. It is the second time growth for the fourth quarter has been downgraded. Growth of 2.9% was initially reported, before being revised to 2.7% in a second estimate.

"The revision primarily reflected downward revisions to exports and consumer spending," the BEA said.

Separate figures from the US Department of Labor showed initial claims for unemployment support were higher than expected last week.

Initial jobless claims in the week ended March 25 amounted to 198,000, increasing by 7,000 from 191,000 a week earlier. The figure topped FXStreet cited consensus of 196,000.

Societe Generale analyst Kit Juckes commented: "The Fed was caught flat-footed as easy money, constrained supply and strong demand boosted inflation last year. The scramble to raise rates far enough, fast enough, had unintended consequences. The Fed, in short, made an omelette out of Humpty-Dumpty and now they can't put Humpty back together, or prevent the knock-on to tighter lending standards after US regional banks saw deposit flight.

"Some analysts (and some at the Fed) will argue that rate hikes should continue until inflation is defeated. That sounds like a recipe for turning Humpty into scrambled eggs, and it seems more likely that we are near the end of the US rate-hiking cycle. But we may not be so close in Europe, where inflation will be as sticky, because demand remains strong, and there isn't a regional banking crisis.

The dollar was largely on the back foot on Thursday. The pound rose to USD1.2371 late Thursday, up from USD1.2326 on Wednesday. The euro surged to USD1.0900 from USD1.0834. Against the yen, however, the dollar rose to JPY132.69, from JPY132.51.

SocGen's Juckes added: "The prospect of divergence between Fed policy and that in Europe and Japan, is dollar-negative, all things being equal. The fact that the dollar is still at very elevated levels means there's room to fall, even if positioning data suggests the consensus is bearish already."

Friday's economic calendar has the eurozone inflation reading at 1000 BST on Friday, after a UK house price index reading from mortgage lender nationwide at 0700 BST.

Stocks in New York were higher at the time of the London equities close. The Dow Jones Industrial Average was up 0.3%, the S&P 500 added 0.5%, while the Nasdaq Composite surged 0.7%.

Back in London, Drax shares recovered and closed 1.1% higher. Shares in the power generator had slumped more than 10% earlier on Thursday.

Drax defended a biomass project which was snubbed by the UK government.

The Department for Energy Security & Net Zero said that Drax's power bioenergy with carbon capture and storage submission would not be one of eight projects selected for its track-1 programme.

The UK government noted that it will continue to engage with Drax's project, adding that "track-1 is not the extent of our ambition".

Drax said it believes its BECCS offering is the "only project that can enable the government to achieve" its aim of a yearly removal of five million tonnes of engineered greenhouse gases by 2030.

"With the right engagement from government and swift decision-making, Drax stands ready to progress our GBP2 billion investment programme and deliver this critical project for the UK by 2030," Chief Executive Officer Will Gardiner said.

Ithaca Energy fell 4.3%. It lowered its yearly output guidance due to the delayed start-up of one field, operational issues at another and the hit from a UK profit levy.

The North Sea oil and gas operator downgraded 2023 production guidance to 68,000 to 74,000 barrels of oil equivalent per day from a previous range of 72,000 to 80,000.

Ithaca said it achieved record production of 71,403 barrels of oil equivalent per day in 2022, which was up 26% from 2021. At worst, the new guidance would represent a 4.8% fall on 2022's production.

Elsewhere in London, Petrofac jumped 70%. Alongside Tokyo-listed Hitachi, the energy services company has been awarded a wind farm contract by Dutch-German grid operator TenneT. The deal is worth EUR13 billion.

The contract, which Petrofac said is the largest in its history, covers six projects, each worth over EUR2 billion. The multi-year framework agreement is part of TenneT's 2 gigawatt high-voltage direct current offshore wind programme.

Gold traded at USD1,972.45 an ounce around the time of the London equities close on Thursday, up from USD1,967.03 on Tuesday. A barrel of Brent oil fetched USD78.48, up slightly from USD78.37.

Friday's UK corporate diary has annual results from computer services firm Computacenter and lender Vanquis Banking Group. Flooring manufacturer James Halstead reports interim results.

By Eric Cunha, Alliance News news editor

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