The FTSE 100 and European stocks rebounded and closed higher this Wednesday ahead of the Fed's interest rate decision.
Pearson (PSON.L), the educational publisher, is the top riser on the FTSE 100, up 9.44%. Yesterday Pearson’s shares tumbled 15%, as the education sector was rattled by fears that artificial intelligence could upend their business models.
There was no such bounceback for BP (BP.L) shares, however, as the oil giant lost 0.41%.
Shares in consumer healthcare business Haleon (HLN.L) dropped 3.22% as it reported earnings of 4.2p per share for the first quarter of the year, below forecasts of 5.24p per share.
Luxury carmaker Aston Martin Lagonda (AML.L) has lost 4.18% after reporting a narrower quarterly pre-tax loss and maintaining its 2023 outlook.
Investors are also processing the new measures announced to encourage companies to float on the London stock exchange rather than abroad as the changes would expose investors to more risk.
Over at the Barclays (BARC.L) AGM, climate protesters disrupted chairman Nigel Higgins, less than 5 minutes into the meeting with a special rendition of the Spice Girls’ hit single “Stop Right Now’.
HAPPENING NOW: I’m at @Barclays AGM where a choir has disrupted the meeting with a rendition of ‘Stop’ by the Spice Girls 🎶 “Hey you! Burning up the earth gotta stop it now baby, we have had enough…” #BarclaysAGMchaos pic.twitter.com/tDTI4HH5hs
— Mia Watanabe (@MiaHWatanabe) May 3, 2023
Protesters from Fossil Free London also disrupted the Barclays AGM, telling the bank that “enough is enough”.
BREAKING: We just now disrupted the Barclays AGM to stop the worst fossil fuel funder in Europe from destroying our future. To be or not to be - that is the climate question.
Don’t shuffle us off this mortal coil
Barclays keep it in the soil! #BarclaysAGMChaos pic.twitter.com/bKu397Grnq
— Fossil Free London (@fossilfreeLDN) May 3, 2023
US and Asian financial markets
Wall Street was mixed ahead of the US Federal Reserve's interest rate decision later.
It's been a wild ride for First Republic, which teetered on the brink of failure for nearly two months. The regional lender last week revealed that deposit outflows totalled over $70bn in the first quarter.
Investors are worried the worst isn't over for regional banks. The S&P 500 regional banking index (KRE) lost over 6% o Tuesday, hitting a new 52-week low, according to Bespoke Investment Group. Shares of PacWest Bancorp (PACW) sank over 27%, while Western Alliance (WAL) plunged as much as 15%. The financial industry weighed down the S&P 500 by more than 2%.
US REGIONAL BANKS UNDER THE COSH yesterday - PacWest Bancorp -28%, Metropolitan Bank -20% and Western Alliance Bank -15%!
— David Buik (@truemagic68) May 3, 2023
Investors are also trying to gauge how much longer the Federal Reserve may need to hike interest rates.
The US Federal Reserve is expected to raise US interest rates again tonight, as it tries to push inflation down to its 2% target.
The Fed’s FOMC committee is forecast to lift its benchmark policy rate by a quarter of one percent, to a new target range of 5%-5.25%, the highest level since mid-2007.
Susannah Streeter at Hargreaves Lansdown said: “Caution is set to take centre stage ahead of the Fed’s interest rate decision later, as investors mull what’s ahead for the mighty US economy.”
“Worries have ratcheted up again that a maelstrom of problems are lurking within regional banks and that there could be another breakage as interest rates are set to be hiked again.”
Asian shares declined, tracking losses on Wall Street as shares of beleaguered banks tumbled again and worries about the US economy deepened.
Markets in Japan and China were closed Wednesday for holidays. In Hong Kong, the Hang Seng (^HSI) index lost 1.32% to 19,670 points.
The pound’s (GBPUSD=X) gained ground against the dollar, pushing above the $1.25 level in early trade.
The sterling (GBPEUR=X) was steady against the euro, trading at €1.1340.
Meanwhile, Brent crude (BZ=F) plunged and was trading at around $72/barrel on renewed market fears over unremarkable industrial data out of China and the possibility that the Fed could hike rates again.
Higher interest rates would lead to an economic slowdown, curtailing oil demand.
Ole Hansen, head of commodity strategy at Saxo, said: "Risk sentiment in general was challenged by continued worries about the stability of the regional US banking system despite the bailout of First Republic by JP Morgan.
"Despite current demand and growth concerns, the Fed is expected to hike once again later today, and it continues to weigh on the demand outlook even as supply side is looking stable for now."
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