Wall Street lower as FTSE 100 and US bank stocks push higher
A look at how the major markets are performing on Friday
The FTSE 100 and European stocks finished higher this Friday as US bank stocks rallied after a rush of results from some of the country's largest financial institutions.
The FTSE 100 (^FTSE) rose 0.44% to close at 7,877 points, while the CAC 40 (^FCHI) in Paris climbed 0.51% to 7,518 points. In Germany, the DAX (^GDAXI) advanced 0.50% to 15,808.
Back in London, Standard Chartered (STAN.L) gained 4.62% after Jefferies lifted its price target on the ‘buy’ rated stock to 1,000p from 950p.
Across the wider FTSE 250 index, veterinary pharmaceuticals giant Dechra (DPH.L) is leading after revealing it's in talks over a potential £4.6bn takeover.
Dechra said it was in talks over a possible bid from Swedish private equity firm EQT in a deal backed by the Abu Dhabi Investment Authority. Shares surged 37% in early trading on the FTSE 250.
Bootmaker Dr Martens (DOCS.L) has seen its sales step up but cut its profit expectations after forking out to tackle problems at its Los Angeles warehouse.
The shoe brand downgraded its outlook after taking about a £15m hit from supply delays at the distribution centre.
It now expects to make about £245m in earnings this financial year, which ended on March 31, due to higher costs and lower wholesale revenue.
Online electricals retailer AO World (AO.L) jumped after saying it expects full-year profit to be around the top end of its guidance range as it continues to see good traction from its initiatives to cut costs and improve margins.
Russ Mould, investment director at AJ Bell, said: "The FTSE 100 followed up yesterday’s Wall Street gains as easing factory gate prices from across the pond suggested the Fed is nearing the end of its battle with inflation.
"Resulting strength in sterling versus the dollar, with the UK currency hitting a 10-month high against its US counterpart, weighed on the index a little thanks to its heavy exposure to overseas earnings which are relatively diminished by a higher pound.
"Sterling’s recovery from near parity to the dollar in the wake of the disastrous mini-Budget in September 2022 has been Lazarus like.
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"The recent banking crisis started across the Atlantic with the collapse of Silicon Valley Bank and the US regional banking sector is perceived as more vulnerable than UK banks.
"All eyes will be on the big US banks as they kick off the first quarter reporting season later today. The potentially dicier outlook for US institutions means the Federal Reserve may have to prioritise its role in preserving financial stability over pursuing further rate hikes to firmly stamp out inflation.
"Consequently, the market is now pricing in at least one more rate hike from the UK versus no more from the Fed in the near-term."
US and Asia financial markets
In the US, the three indexes main lost ground even as bank stocks rallied after a rush of results from some of the country's largest financial institutions.
The Dow Jones (^DJI) lost 0.65% to 33,809 points. The S&P 500 (^GSPC) slipped 0.42% to 4,128 points and the tech-heavy NASDAQ (^IXIC) tumbled 0.59% to 12,093.
JPMorgan (JPM), Wells Fargo (WFC), and Citi (C) all saw shares higher after each bank reported results before the market open. PNC Financial (PNC) stocks was fractionally lower after having risen in pre-market trading.
In early trade on Friday JPMorgan stock rose 7.58% while Citi gained 4.40% and Wells Fargo rose 1.74%.
Read more: Bank of England expects inflation to fall as pound hits 10-month high
FOREX.com market analyst Fiona Cincotta said this quarter’s bank earnings were under the spotlight more than usual given the recent turmoil in the sector.
“While the fallout was contained quickly and fears of a more serious financial crisis had eased, the market is looking to these earnings for any further clues of cracks in the sector,” she said.
“Stronger-than-expected results from Citigroup and Wells Fargo, plus JP Morgan crushing estimates, have helped ease those concerns.”
Meanwhile, retail sales dropped 1% in March, twice as large a fall as expected.
Spending at motor vehicle and parts dealers was down 1.6% month-on-month, while electronics spending dropped 2.1% in the month, and were 10.3% lower than last year.
Retail sales are mostly goods, which are typically bought on credit, and are not adjusted for inflation. The second straight monthly decrease followed a sharp surge in January.
US retail sales fell -1.0% MoM in Mar after a -0.2% MoM decline in Feb.
Ex auto & gas sales were down just -0.3% MoM with electronics sales falling -2.1% MoM, and building materials sales falling -2.1% MoM.#retail (@uscensusbureau) https://t.co/CG6qXFJ6rJ pic.twitter.com/o53ybw3bXh
— MTS Insights (@MTSInsights) April 14, 2023
In Asia, Tokyo’s Nikkei 225 (^N225) rose 1.20% to 28,493 points, while the Hang Seng (^HSI) in Hong Kong advanced 0.38% to 20,422. The Shanghai Composite (000001.SS) climbed 0.63% to 3,339 points.
Pound vs dollar
The pound (GBPUSD=X) has rallied significantly over the last several days, climbing to a 10-month high against the US dollar.
Read more: FTSE 100: Tesco profit halves to £1bn amid higher costs
Sterling hit $1.2546 on Friday morning, the highest since last June, as the dollar dropped on the foreign exchange markets on hopes that the US Federal Reserve could stop lifting interest rates soon.
However, the opposite is happening against the euro, with sterling (GBPEUR=X) down by 0.11% and hovering around €1.13.
Meanwhile, Brent crude (BZ=F) rose was trading at around $86/barrel as signs of increasing demand in China was enough for markets to look past an OPEC warning on potential headwinds.
China’s oil imports jumped over 22% in March to their highest level since June 2020.
Watch: ‘We’re in a period of pretty great uncertainty,’ Morningstar Wealth CIO says
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