Proactive Investors -
- FTSE 100 recovers early losses, down 4 points,
- Unemployment steady, average wage growth falls
- Rolls-Royce advances, Citi sets 255p price target
Lloyds boss says banks not seeing a "flight to quality" yet
British banks are not yet seeing a "flight to quality" in deposits among customers nervous about the safe-keeping of their money following the collapse of U.S. lender Silicon Valley Bank last week, Lloyds chief executive Charlie Nunn said on Tuesday, reported by Reuters.
"What's happened with SVB is relatively idiosyncratic compared to the UK," Nunn told a Morgan Stanley event, referring to the demise of the specialist lender, which has triggered widespread banking turmoil and a rout in stocks globally.
"We haven't seen what we've seen in the US, which is the flight to quality," Nunn said. "But let's see how that plays out and we'll see how people feel over the next period of time."
In a sign of stabilisation shares in Lloyds Banking Group PLC are now 0.4% higher, NatWest is 0.7% higher and Barclays is 0.9% higher.
Oil prices fall but FTSE recovers ground
Oil prices have tumbled as fears that the turmoil in the banking sector could prompt a global recession intensify.
Investors are also gearing up for the latest US CPI figures. A strong inflation reading would leave the Federal Reserve with a delicate balancing act of retaining its commitment to taming inflation without sending the US economy into a slowdown.
Late morning and Brent crude was down 2.1% at US$79.12/barrel while West Texas Intermediate crude prices fell 2.8% to US$72.68/barrel.
In London oil majors BP PLC and Shell PLC were lower, down 1.3% and 1% respectively.
Meanwhile the FTSE 100 has recouped most of its early losses now at 7,545.06, down 3.57 points, or 0.047%.
Rate rises in the balance
The peak for interest rates has tumbled in the UK in the wake of the banking turmoil.
Andy Bruce at Reuters posted a chart which showed just how much markets markets have reined in bets that the Bank of England will keep on raising interest rates.
This chart shows just how much markets have reined in bets that the @bankofengland will keep on raising interest rates.The different lines represent the expected increase in Bank Rate for future MPC meetings vs now, in basis points. MD0 = next meeting.
Based on the OIS curve. pic.twitter.com/cIbZSQAkhk
— Andy Bruce (@BruceReuters) March 14, 2023
He explained the pricing suggests the market sees roughly a 66% chance that they will raise rates at their next meeting.
Ed Conway at Sky noted as of Friday investors were expecting interest rates to peak at around 4.75% in August. Following the collapse of Silicon Valley Bank they’re now expecting a peak of just 4.25%.
As of Fri investors were expecting @bankofengland interest rates to peak at around 4.75% in Aug.Following the collapse of Silicon Valley Bank and all that, they’re now expecting a peak of just 4.25%.
Things are shifting…
Below chart shows changes in expectations for AUG rates???? pic.twitter.com/GH4svt5KcS
— Ed Conway (@EdConwaySky) March 13, 2023
Rates is also a topic of debate across the pond. Neil Wilson at markets.com asked: “Could the Fed cut rates at its March meeting? Markets have repriced terminal rates aggressively in the wake of SVB’s collapse and subsequent roiling of financial stocks.”
He pointed out investment banks such as Nomura now expect the Fed to cut rates, while Barclays , Goldman Sachs and NatWest have called for the Fed to pause rate hikes.
But Wilson warned “if the Fed even pauses, let alone cuts, it’s inflation-fighting reputation will be in tatters.” He noted the market pricing is at evens for 25bps or a pause.