Calm returns to global markets as banking crisis fears soothed
The FTSE 100 jumped by about 2% at one point during the day, and closed 132.37 points higher, or 1.79%, at 7,536.22.
Bank shares rebounded and some confidence in the sector has been restored after the US Treasury secretary said the country’s financial system is stable.
Janet Yellen told the American Bankers Association that “contagious bank runs” were the cause of recent turmoil for a number of global banks.
She signalled that the US government would intervene to protect people’s deposits if there were to be any new failures at smaller institutions.
Her remarks seemed to help calm the waters of the financial markets, with the US’s top stock exchanges starting the day trading higher.
If this can be followed by a few days of calm with no other banks emerging as being at risk of collapse without major intervention, stock markets could continue to recover
UK Chancellor Jeremy Hunt was also giving his assurances that UK banks are resilient enough to withstand the current turmoil, but that the Government “stands ready” to act to maintain stability.
UK bank shares had already bounced back on Tuesday with FTSE 100-listed giants Barclays, NatWest and Lloyds all trading higher after suffering significant losses in recent days.
The blue-chip index jumped by about 2% at one point during the day. It closed 132.37 points higher, or 1.79%, at 7,536.22.
Craig Erlam, senior market analyst for OANDA, said: “Stock markets are bouncing back on Tuesday as some calm returns following the UBS takeover of Credit Suisse and traders look ahead to the Fed’s interest rate decision on Wednesday.
“The response to recent events has been impressive from central banks, regulators and governments, and while we can commend them for their firefighting skills, only time will tell if they’ve been successful in extinguishing the flames.
“But markets are clearly comforted by the measures that have been put in place to prevent a full-blown banking crisis.
“If this can be followed by a few days of calm with no other banks emerging as being at risk of collapse without major intervention, stock markets could continue to recover.”
European stocks outside the UK also enjoyed a resurgence, with the German Dax closing 1.75% higher and the French Cac up 1.42%.
The US’s S&P 500 was up about 0.7% and Dow Jones trading 0.5% higher when European markets closed.
Sterling, however, gradually declined during Tuesday, and was down by 0.65% to 1.2194 US dollars, and down 1.1% to 1.1321 euros when markets closed.
In company news, Just Eat Takeaway.com said it was cutting about 1,700 delivery driver jobs and 170 head office roles after a slowdown in demand.
The firm said the decision comes as part of an overhaul of its operations as it seeks to become more efficient and cut costs across the business.
Investors did not appear to be deterred by the move and its share price lifted by 1% at the end of the day.
Tesco customers expressed their disappointed after the supermarket told Clubcard holders it was cutting the value of rewards, so that it could continue to keep prices low.
Shares in the UK’s biggest supermarket lifted by 2.8%.
Meanwhile, B&Q owner Kingfisher said it expects its falling profits to drop even further this year, after balancing rising costs with attempts to maintain prices for customers.
The DIY giant told investors that a big chunk of its sales last year came from energy and water-saving products as households sought to tackle rising bills.
Shares in Kingfisher slipped by 1.5%.
The biggest risers on the FTSE 100 were Rolls-Royce Holdings, up 9.02p to 150p, NatWest Group, up 14.6p to 272.4p, Prudential, up 52.5p to 1,065p, Ashtead Group, up 252p to 5,118p, and Barclays, up 6.78p to 143.14p.
The biggest fallers on the FTSE 100 were Fresnillo, down 29.2p to 714.8p, Endeavour Mining, down 71p to 1,760p, Kingfisher, down 4p to 269.3p, Severn Trent, down 41p to 2,808p, and United Utilities Group, down 13.5p to 1,043p.