Stock markets have plunged in London and across Europe as concerns over the US banking sector hammer financial institutions.
The FTSE 100 has dropped 1.9pc while the domestically-focused FTSE 250 has plummeted as much as 2pc following a rout on Wall Street on Thursday.
Barclays shed as much as 6.1pc, with HSBC down 5.3pc, Lloyds off as much as 4.7pc and Natwest dropping as much as 4.5pc after signs of trouble at a regional US lender sparked concerns about the wider sector.
The contagion also spread to Europe, with Deutsche down 10pc on German markets and Societe Generale falling 5.5p after the Paris stock exchange opened. BNP Paribas shed 4.4pc and Credit Agricole tumbled 3.6pc.
US lenders were sent into a tailspin after SVB Financial Group, which specialises in venture-capital financing, announced it had suffered significant losses on its portfolio, which includes US bonds and mortgage-backed securities.
This has sparked wider concerns about the sector as the value of bonds fall when central banks raise interest rates, which has been happening across the world in an effort to tame rising inflation.
Major US banks subsequently suffered hefty losses, with Wall Street titans including JP Morgan, Bank of America, Wells Fargo and Citigroup all deep in the red.
The concerns were exacerbated by the news on Wednesday that crypto banking giant Silvergate said it planned to close as the sector faces more turmoil.
Read the latest updates below.
Robert Walters to retire after 38 years leading recruitment firm
Global recruiter Robert Walters has announced the retirement of its founder and namesake, as the company revealed fierce competition in the labour market has helped it achieve its highest ever profit.
Robert Walters will step down as chief executive, having set up the business in 1985 and been at the helm for 38 years.
He will be succeeded by Toby Fowlston as chief executive-designate, who has spent 23 years at the firm.
The announcement coincided with Robert Walters revealing an all-time high pre-tax profit of £55.6m in 2022, 11pc higher than the previous year.
Its revenue hit more than £1bn after jumping by 13pc year-on-year.
Fierce competition for talent and wage inflation helped lift the firm’s profit during the first half of the year, as a tight labour market put pressure on employers to raise staff pay.
Wages often jumped by around 20pc or more for people moving jobs as roles were in high demand, particularly for niche skill sets, the firm said.
Biden’s subsidies ‘may divert £2bn Drax investment away from UK’
Joe Biden’s green subsidies may lure power generator Drax to divert £2bn of investment in carbon capture to the US, civil servants reportedly fear.
A delegation of US senators is scheduled to visit the company’s power station in Selby, North Yorkshire, next week, Bloomberg reported.
The March 16 visit, where they will be hown the company’s plans for new bioenergy carbon capture and storage technology, is understood to have sparked concerns at the Department for Business and Trade.
Drax has said it would invest £2bn fitting carbon capture equipment to its UK plant as part of a plan that would ultimately support as many as 10,000 jobs.
The company says the equipment will be able to capture 95pc of the carbon dioxide emitted by its biomass-fired power plant and bury it under the North Sea.
Drax declined to comment.
BP boss’s pay doubles after record profits
BP’s boss more than doubled his pay last year as the company posted record profits amid surging oil and gas prices.
Bernard Looney received £10m, slightly exceeding Shell’s outgoing chief executive Ben van Beurden, who took home £9.7m.
On top of his salary of £1.4m, Mr Looney received an annual bonus of £2.4m and long-term share award with a value of £6m, which was below the maximum possible amount in both cases.
Paula Rosput Reynolds, chair of BP’s remuneration committee, said:
The three years in which Bernard has been our chief executive have been among the most challenging in BP’;s recent history.
During that time almost all of the metrics that we set forth – and which were endorsed by shareholders – have been met.
Market rout continues – and it may get worse
The FTSE 100’s slump is continuing to worsen.
The blue chip index has now fallen 1.9pc as UK banks joined the decline in global lenders.
Banks have dropping 4.6pc to an eight-week low, spooked by a brutal rout in US bank SVB Financial following a share sale.
HSBC, Barclays, Lloyds and Natwest Group dropped between 4.3pc and 6pc.
The FTSE 250 has plummeted 2pc to 19,291.24.
The market hammering dampens news that the British economy grew by a better-than-expected 0.3pc in January compared to the previous month.
The day may yet get worse for markets, as across the Atlantic, data on US non-farm payrolls out this afternoon will be watched for more clues on the likely size of interest rate rises by the Federal Reserve this month.
Rising interest rates behind US banking concerns
Silicon Valley Bank — a small technology-focused lender — said Thursday it suffered significant losses on its portfolio, which included US Treasury bonds and mortgage-backed securities.
That has raised concerns about the wider banking market, as banks tend to hold lots of bonds in their portfolio.
The value of bonds drops when central banks raise interest rates, as rising rates lessen the value of their returns.
The Chairman of the US Federal Reserve said this week that rates may need to move higher to tame inflation.
The Bank of England and European Central Bank have also indicated more interest rate rises may be in the pipeline.
European bank stocks plunge following US rout
Shares in Germany’s biggest banks plunged amid the trouble at a regional US lender SVB Financial Group.
Deutsche Bank shares were down nearly 10pc, while Germany’s second-largest lender Commerzbank tumbled by 6.12 percent.
Shares of France’s biggest banks have also sunk. Societe Generale shares dropped 5.5pc after the Paris stock exchange opened, while BNP Paribas shed 4.4pc and Credit Agricole tumbled 3.6pc.
Bank stocks plummet as fears over US lenders spark selloff
Britain’s banking stocks are dragging down the markets as fears over the sector in the US spilled over into the UK.
On the FTSE 100, Barclays has shed 6.1pc, Lloyds has plunged 4.7pc and Natwest has dropped 4.5pc after signs of trouble at a regional US lender.
It has sparked wider concerns about the sector.
Berkeley Homes to be ‘cautious’ as house sales down a quarter
Housebuilder Berkeley Group has said it is taking a “cautious” approach to releasing new phases of developments to the market amid continued “volatility” in the UK property sector.
The company nevertheless kept its outlook for the financial year unchanged.
It told shareholders that sales since the end of September have been around 25pc lower than the “strong” first five months of the financial year.
The sales drop comes amid a backdrop of higher interest rates affecting mortgages and increased costs for potential property buyers.
In a statement, the firm said: “This is a resilient performance in the context of the market volatility since the end of September and reflects the underlying demand for quality homes in London and the South East.”
Berkeley is on track to deliver pre-tax earnings of approximately £600m for the year ending April 30.
US bank rout seeps into UK markets
The sell-off in London comes after US lenders were sent into a tailspin on Thursday.
SVB Financial Group, which specialises in venture-capital financing, announced a stock offering and offloaded securities to raise much-needed cash amid falling deposits.
The firm’s shares collapsed 60pc in New York as it said it lost $1.8bn following the sales.
The news came as crypto banking giant Silvergate said it planned to close as the sector faces more turmoil.
As a result, major US banks suffered hefty losses, with Wall Street titans including JP Morgan, Bank of America, Wells Fargo and Citigroup all deep in the red.
Markets plunge at the open
The growth in the economy could not stop a big selloff on the markets to start the day.
The FTSE 100 slumped following a rout on Wall Street with banks taking a hefty hit after signs of trouble at a regional US lender sparked concerns about the wider sector.
The blue-chip index plunged 1.5pc as markets opened to 7,760.95 while the domestically-focused FTSE 250 dropped by 1.6pc to 19,366.21.
Broader picture on economy ‘more ambiguous,’ warns NIESR
Paula Bejarano Carbo, associate economist at the National Institute of Economic and Social Research (NIESR), said:
While this appears to be good news for the UK economy, the broader picture is more ambiguous: GDP was flat in the three months to January relative to the previous three months and also flat compared to January 2022.
Despite this, the outlook for the first quarter of 2023 continues to improve as higher-frequency data, including the services and construction February PMIs, indicate that activity will continue to pick-up in February, suggesting that any contraction we might see over Q1 is likely to be shallow.
Return to schools and end of postal strikes help boost economy
The services sector was the main driver for the return to growth in January, rising by 0.5pc.
The largest driver of the growth in services was education, which grew by 2.5pc following a fall of 2.6pc in December.
School attendance levels returned to normal levels following a significant drop the previous month.
Transport and storage services grew by 1.6pc, with the main contributor to this coming from a 6.4pc increase in postal and courier activities.
This growth comes after a fall of 10.5pc in December amid postal strikes.
The only negative contributor in services was real estate activities, which fell by 0.1pc.
Within this subsector, real estate activities on a fee or contract basis fell by 2.3pc.
Pound rises after data shows economy grew
Sterling has moved higher as data from the Office for National Statistics showed the economy grew by 0.3pc in January.
The pound has gained 0.2pc against the dollar to be worth more than $1.19.
It remains flat against the euro, which is worth nearly 89p.
Growing economy ‘increases fears rates will be higher for longer’
Neil Birrell, chief investment officer at asset management business Premier Miton Investors, said:
The UK economy bounced back a little in January, showing more growth than expected.
In most regions of the world the economic data is ambiguous, but it does look like policy is not having the desired effect of dampening activity as much as the central banks would like and that includes the UK.
This number raises hopes that a protracted recession can be avoided, but increases fears that rates will be higher for longer.
Russian war in Ukraine having ‘dragging effect’ on economy, says Cleverly
Foreign Secretary James Cleverly has said ministers would like to see “greater” economic growth than the 0.3% recorded in January.
He told Times Radio:
I remember it wasn’t that long ago we were predicted in a heavy recession.
Of course we’d like to see greater growth figures than that but there are huge international economic headwinds.
The Russians’ illegal and unprovoked invasion of Ukraine has pushed up fuel prices, pushed up food prices, these are all having a dragging effect on the UK economy.
Economy in ‘managed decline,’ says Reeves
Shadow chancellor Rachel Reeves said:
Today’s results show our economy is still inching along this Tory path of managed decline.
People will be asking themselves whether they feel better off under the Tories, and the answer will be no.
But this is not a new trend. 13 years of Tory failure and wasted opportunities have left growth on the floor and our economy weakened.
Growth boosts hopes UK will avoid recession
Jonathan Moyes, head of investment research at Wealth Club said:
The UK economy continues to beat gloomy expectations. Led by the dominant services sector, GDP growth of 0.3pc was stronger than the 0.1pc expected. This follows stronger than expected performance in 2022.
It may take a great deal more expectation beating data to shift the bleak expectations for the UK economy.
However, a quiet, more optimistic, consensus does appear to be forming. The economic outlook is much improved, energy prices are falling sharply, China is reopening, and interest rate expectations have eased significantly.
All eyes will now turn to Jeremy Hunt and the spring budget next week. With a chorus of voices calling for some relief from the highest tax burden in living memory, will the Treasury spend this unexpected growth windfall?
Economy’s growth ‘no surprise,’ says Panmure Gordon
Arts, entertainment and recreation grew by 3.4pc in January, largely driven by the return of Premier League football after the World Cup.
Sports, amusements and recreation activities grew by 8.9pc, after the end of temporary shocks caused by the tournament in Qatar and strikes, according to Panmure Gordon’s chief UK economist Samuel Tombs.
Public finances better than expected before Budget, says Lloyds
Jeavon Lolay, head of economics and market insight at Lloyds Banking Group said:
Heading into the Budget, public finances are in better shape than expected giving the Chancellor additional capacity to support the economy. Consumers could see a freeze in the Energy Price Guarantee and a freeze on fuel duty.
Growing the economy is a key part of the Government’s agenda and we know from our data that staff shortages are constraining economic activity. Improving labour market participation with targeted policies in areas like childcare and pensions, would help raise the productive capacity of the UK economy.
While our data shows an improvement in economic optimism, inflation remains business’ greatest concern. Business leaders will be watching the Budget for measures to encourage them to invest in technology or sustainability to reaffirm their confidence in the UK economy.
Return to classroom drives growth, says ONS
ONS director of economic statistics Darren Morgan said:
The economy partially bounced back from the large fall seen in December.
Across the last three months as a whole and, indeed over the last 12 months, the economy has, though, showed zero growth.
The main drivers of January’s growth were the return of children to classrooms, following unusually high absences in the run-up to Christmas, the Premier League clubs returned to a full schedule after the end of the World Cup and private health providers also had a strong month.
Postal services also partially recovered from the effects of December’s strikes.
Hunt: ‘UK economy more resilient than expected’
Chancellor Jeremy Hunt said:
In the face of severe global challenges, the UK economy has proved more resilient than many expected, but there is a long way to go.
Next week, I will set out the next stage of our plan to halve inflation, reduce debt and grow the economy – so we can improve living standards for everyone.
UK economy grew at start of the year
The UK’s economy returned to growth in January, easing fears of an impending recession ahead of Chancellor Jeremy Hunt’s spring Budget, official figures have shown.
Gross domestic product (GDP) rose by 0.3pc in January, according to the Office for National Statistics.
The services sector also grew by 0.5pc in January after falling by 0.8pc in December.
Chancellor Jeremy Hunt said: “In the face of severe global challenges, the UK economy has proved more resilient than many expected, but there is a long way to go.
“Next week, I will set out the next stage of our plan to halve inflation, reduce debt and grow the economy – so we can improve living standards for everyone.”
The UK economy narrowly avoided recession at the end of 2022 even though the economy shrank by 0.5pc in December.
The economy flatlined in the final three months of last year, following a drop of 0.3pc between July and September, according to the Office for National Statistics (ONS).
Although the economy grew slightly to begin the year, looking at the broader picture, GDP was flat in the three months to January.
Services expanded but manufacturing and construction were a drag on growth:
The year got off to a positive start as the economy grew by 0.3pc in January, according to the Office for National Statistics..
The expansion in gross domestic product (GDP) comes after Britain narrowly avoided a recession at the end of last year.
5 things to start your day
1) Hunt forecast to have £166bn of headroom for Budget tax cuts | Chancellor comes under renewed pressure to pivot on corporation tax rise
2) I struggle to find men to work for me, says John Lewis chief | Dame Sharon White says she has been criticised for trying to ‘rebalance’ the ‘strong male culture’ at the retailer
3) Brexit freedoms make UK a magnet for highly-skilled migrants, says OECD | Abolishing red tape after leaving the EU is helping Britain lure more global talent
4) Credit Suisse shares hit record low after accounts questioned by US regulator | Struggling Swiss bank delays annual report after conversation with Securities and Exchange Commission
5) Inside Joe Biden’s plan for a tax raid on billionaires | The US President wants higher taxes – but he faces a battle to get them past Republicans
What happened overnight
Falling bank stocks caused Asian markets to drop after a surprise capital raising at a Silicon Valley start-up lender unleashed fears of broader banking-system stress.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.7pc to a two-month low, with banks and Hong Kong tech stocks leading losses. Australia’s benchmark index S&P/ASX200 lost 2.3pc.
Japan’s shares ended lower, snapping a five-day winning streak, after the Bank of Japan left its ultra-easy monetary policy unchanged at Governor Haruhiko Kuroda’s last meeting.
The benchmark Nikkei 225 index dropped 1.7pc to close at 28,143.97, while the broader Topix index lost 1.9pc to 2,031.58.
The US dollar edged higher and short-end Treasuries extended sharp overnight gains – driving two-year yields down another 12 basis points to 4.7837pc in Tokyo trading.
The sharp moves followed SVB Financial Group, parent of start-up-lender Silicon Valley Bank, noting a higher-than-expected “cash burn” from clients, falling deposits and rising costs of capital. It announced an equity sale hours after crypto-focused lender Silvergate said it was closing down.
Early trading gains on Wall Street were sharply reversed by the end of the day. The Dow Jones Industrial Average closed 1.7pc lower to 32,254.86.
The broad-based S&P 500 fell 1.9pc to 3,918.32 while the tech-rich Nasdaq Composite sunk 2.1pc to 11,338.36.