Wall Street stronger as FTSE 100 closes higher amid banking sector recovery
The FTSE 100 and European stocks finished higher this Wednesday as anxiety about the global financial system began to fade following three high-profile bank failures.
The FTSE 100 (^FTSE) rose 0.94% to close at 7,554 points, while the CAC 40 (^FCHI) in Paris gained 1.26% to 7,177 points. In Germany, the DAX (^GDAXI) climbed 1.03% to 15,299.
UBS appoints new CEO to steer Credit Suisse takeover
UBS (UBS) has brought Sergio Ermotti back as chief executive to steer its takeover of Credit Suisse (CS).
Ermotti, who was chief executive for nine years before stepping down in 2020, will start on April 5, UBS said on Wednesday.
The move comes less than two weeks after UBS agreed to take over Credit Suisse in a £2.65bn deal forced through by Swiss authorities who feared that a failure to protect depositors would trigger a global banking meltdown.
“The task at hand is an urgent and challenging one,” Ermotti said. “In order to it in a sustainable and successful way, and in the interest of all stakeholders involved, we need to thoughtfully and systematically assess all options.”
The task involves combining two banks with $1.6tn in assets, more than 120,000 staff and a complex balance sheet.
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Victoria Scholar, head of investment at Interactive Investor, said: “Ermotti previously served as chief executive of UBS from 2011 until 2020 and is currently the chairman of Swiss Re. Ralph Hamers who has been in the top job since November 2020 is stepping down ‘in light of the new challenges and priorities facing UBS’. Ermotti said ‘the task at hand is an urgent and challenging one’.
“Having steered UBS through the aftermath of the 2008 global financial crisis and a rogue-trading scandal, Ermotti is a dab hand at crisis management. He also helped UBS to navigate through the onset of the pandemic and the corresponding market volatility throughout most of 2020.”
“The new CEO will have the immediate challenges of cutting staff, reducing Credit Suisse’s investment bank, finding other synergies between the two lenders and convincing shareholders about the prospects of the combined entity.”
Credit Suisse has violated a 2014 plea agreement with the US government and concealed more than $700m from tax authorities – and the Swiss bank continues to help ultra-wealthy Americans dodge taxes, the US Senate Finance Committee has concluded after a two-year investigation.
US and Asia
Wall Street rose Wednesday as investors eye the end of an eventful first quarter that has seen a bank crisis break out, a crypto winter show signs of thawing, and last year's stock market performance tentatively reverse.
The Dow Jones (^DJI) rose 0.52% to 32,563 points. The S&P 500 (^GSPC) climbed 0.90% to 4,006 points and the tech-heavy NASDAQ (^IXIC) advanced 1.12% to 11,846.
As banks dominated the headlines again this week, federal regulators were slammed with intense questions from lawmakers on Tuesday regarding the collapse of SVB and Signature Bank. All three regulators agreed that financial regulations need to be tightened following the recent turmoil.
“I anticipate the need to strengthen capital and liquidity standards for banks with over $100bn,” Federal Reserve vice chair for Supervision Michael Barr said at the Senate Banking Committee hearing, responding to Democratic Senator Elizabeth Warren's question.
In Asia, Tokyo’s Nikkei 225 (^N225) rose 1.33% to 27,385 points, while the Hang Seng (^HSI) in Hong Kong gained 1.79% to 20,138. The Shanghai Composite (000001.SS) lost ground, falling 0.21% to 3,238 points.
Back in London, the UK high street chain Next (NXT.L) has said it expects to raise its prices more slowly over the year ahead as it revealed better-than-expected annual profits.
The firm revealed sales increased 8.4% to £5.1bn in the year to the end of January, while pre-tax profits increased 5.7% to £870.4m.
Its profits were £10m higher than its previous guidance and up 16.3% on year before the start of the pandemic.
“We now believe price rises in the second half will be materially lower than we initially feared,” it said.
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The group, which has been hiking prices to offset surging cost pressures, said price inflation is set to be "more benign" than previously thought, forecasting increases across its ranges of 7% this spring/summer, easing back to 3% in the autumn/winter.
Pound vs dollar
The pound (GBPUSD=X) lost ground after a strong session on Tuesday. Against the dollar, the pound slipped 0.14% and was trading around in the direction of $1.23.
Sterling (GBPEUR=X) was muted against the euro, at €1.13.
Meanwhile, Brent crude (BZ=F) rose slightly and was trading at around $78/barrel, extending gains from the previous session on supply disruption risks from Iraqi Kurdistan and hopes that banking sector turmoil is contained.
Fiona Cincotta at City Index said the gains come amid ongoing supply concerns and as the demand outlook improves.
“A dispute between Turkey and Iraq surrounding oil supply from Kurdistan remains unresolved and has resulted in halted shipments of around 400,000 barrels a day, tightening the market,” she said.
A weaker US dollar, which makes oil less expensive for international buyers, also lifted crude prices.
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