The FTSE 100 had a roaring start to Tuesday’s session following comments by Bank of England Governor Andrew Bailey suggesting rates hikes could soon come to an end, and said the current banking crisis was not like the 2008 financial crisis.
The FTSE 100 traded as high as 7,520 in early trade on Tuesday, but fell back to trade dead flat by midday.
Early optimism saw another jump in banking shares. Barclays traded above 140p before falling back to trade negatively, Natwest shares also gave up all of their early gains.
“It’s all about confidence right now – and anything which reassures shareholders, creditors and depositors that their money is safe with the banks is one step further away from the carnage which claimed SVB and Credit Suisse,” said AJ Bell investment director Russ Mould.
The confidence Mould alludes to appears to be fragile. Traders selling early strength suggests markets are conscious the current crisis is not yet completely over.
Diageo CEO steps down
After a 10-year stint as CEO of Diageo, Sir Ivan Menezes will step down and be replaced by Debra Crew. Diageo shares fell on Tuesday.
“The market reaction, with a mere 0.5% decline in the share price, shows that investors aren’t worried about big changes to the business. Instead, this looks like as smooth a transition as an athlete passing the baton in a sprint relay,” said Russ Mould.
Analysts highlighted the precarious role for the new CEO with Diageo shares trading above 20x earnings.
“Growth is expected to slow in the short-term however, and an earnings multiple of about 20x means Debra Crew will be under extra pressure to perform,” commented Derren Nathan, Head of Equity Research at Hargreaves Lansdown.
Ocado
Ocado shares were the FTSE 100’s top faller after the company released an update on their Ocado retail partnership with Marks & Spencer. Revenue, customer numbers and orders per week were all higher, but investors were apparently unhappy with the lower average basket size and shares fell over 5%.
“Ocado’s retail arm is in a difficult position. While the cost-of-living crisis rumbles on, being a more premium name in the sector comes with immediate challenges,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown.
“However, the group seems to be doing well with the tools at its disposal. Although the number of items people are buying per-shop is dropping, which is to be expected as post-Covid shopping habits normalise, this is being successfully offset by higher prices.”
