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FTSE 100 rallies as banking nerves recede after US action

Published 17/03/2023, 09:00
© Reuters.  FTSE 100 rallies as banking nerves recede after US action

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FTSE 100 extends gains as a degree optimism returns

The Footsie has extended its gains, now up 72.97, or 0.98%, at 7,483.00.

Analysts at Deutsche Bank led by Jim Reid said: “Some optimism has returned to markets over the last 24 hours, with bank stocks stabilising on both sides of the Atlantic and two-year yields surging back.”

“Even the European Central Bank’s decision to pursue a 50bp hike went without incident, and investors grew in confidence that the Fed would follow up with their own 25bps hike next week, so we’re starting to see a modest change in the mood music.”

“It’s also telling this morning that in Asia, US yields and equity futures are fairly stable.”

However Reid noted: “The concerns haven’t gone away though, as while Credit Suisse saw its equity price increase, its bonds/CDS were generally flat to weaker…”

In London, banks are firmer. Lloyds (LON:LLOY), Barclays and NatWest are up 2.4%, 1.8% and 1.4%. The European Stoxx 600 banks index is up 1.9% while the CAC 40 in Paris was up 1.1% and the DAX 40 in Frankfurt rose 0.9%.

Rising crude prices supported BP and Shell shares. The oil majors rose 4.2% and 3.5%, placing them top of the FTSE 100’s risers.

BP 's shares rose despite, a US federal investigation finding that a BP subsidiary violated workplace safety practices, leading to the deaths of two workers.

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The investigation concerns an incident that caused fatal burns to two workers in an Oregon, Ohio refinery's crude unit, operated by BP Products North America. The regulator proposed a fine of US$156,250.

Oil prices were supported by reports that Russian and Saudi Arabian officials met to discuss stabilising the market. Brent crude was trading 0.6% higher at US$75.09/barrel.

GSK buoyed by Deutsche upgrade

GSK PLC’s shares jumped 1.4% in early exchanges in London supported by an upgrade by Deutsche Bank .

The German investment bank has put the FTSE 100-listed pharma giant on its ‘buy’ list and increased its price target by 13% to 1,700p.

Analyst Emmanuel Papadakis taken a look at the prospects for the group’s anti-viral drugs in HIV, RSV and hepatitis B and raised sales and EBITDA forecasts as a result.

The broker noted GSK trades at a 4% dividend/9% free cash flow yield, 9x financial year 2023 P/E for +3/+8% sales/EPS compound annual growth rates through 2022-26 which it thinks leaves GSK looking attractive.

“We think GSK is too cheap if there is any semblance of sustainability through FY27/28, something we now think is probable courtesy of long acting injectables in HIV and RSV, with potential upside from bepirovirsen in HepB.”

Read more on Proactive Investors UK

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