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Wall Street higher as FTSE 100 closes week with modest gains

A look at how the major markets are performing on Friday

FTSE  Passers-by walk near a First Republic Bank branch location, Wednesday, April 26, 2023, in Boston. First Republic Bank's stock continued to slide Wednesday, an ongoing rout that has erased a portion of its value just this week on concerns about the bank's financial health in the wake of two other bank collapses. (AP Photo/Steven Senne)
FTSE flat as US regulators race to save First Republic Bank after share price collapse. Photo: Steven Senne/AP (ASSOCIATED PRESS)

The FTSE 100 and European stocks finished mixed this Friday on renewed recession fears amid banking turmoil.

Wall Street was mostly higher as investors looked to cap a topsy-turvy week for investors, with a rush of earnings from big tech companies.

Meanwhile, US officials view a private-sector deal to rescue First Republic (FRC) as preferable to the bank falling into Federal Deposit Insurance Corporation (FDIC) receivership, according to Reuters.

First Republic’s share price has dropped by 95% since it was caught up in the regional banking frenzy sparked by the collapse of Silicon Valley Bank.

FTSE 100

The FTSE 100 (^FTSE) rose 0.15% to finish at 7,844 points, while the CAC 40 (^FCHI) in Paris lost 0.29% to 7,462 points. In Germany, the DAX (^GDAXI) rose 0.40% to 15,863.

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NatWest (NWG.L) reported higher-than-expected profits of £1.3bn ($1.6bn) in the first three months of this year, and said it would be able to navigate a tough economic environment.

Nevertheless, the bank’s share price dropped by 4.45% as it as it put aside £70m to cover an increasing number of defaults and the amount of deposits it held fell by £11bn.

Other banking stocks fell with Lloyds (LLOY.L) slipping 1.68% and Barclays (BARC.L) down 1.93%.

Investors are also cautious as gross domestic product in the eurozone expanded by 0.1% in the fourth quarter, below expectations.

Andrew Kenningham, chief Europe economist at Capital Economics, said: "The very small increase in GDP in Q1 means a technical recession has been avoided by a whisker."

Pearson (PSON.L) rose 3.98% after the education group said it was on track to meet its annual guidance, and also deliver £120m of cost efficiencies this year.

Read more: Trending tickers: Amazon | Numis | Pearson | Sony

Prudential (PRU.L) was another share on the rise, up 4.13%, after it said sales had risen reflecting growth in China and Hong Kong as markets improved post-COVID.

Numis (NUM.L) surged 67.16% after Deutsche Bank (DBK.DE) said it would buy one of the City of London's best-known boutique investment banks for about £410m.

US and Asia

Wall Street on Friday was mixed, with a rush of earnings from big tech companies like Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), and Amazon (AMZN) holding investor attention.

The Dow Jones (^DJI) rose 0.38% to 33,955 points. The S&P 500 (^GSPC) climbed 0.29% to 4,147 points and the tech-heavy NASDAQ (^IXIC) was flat at 12,140.

Through Thursday's close, the S&P 500 and Dow Jones Industrial Average were roughly flat for the week, while the Nasdaq's surge on Thursday put the tech index higher by about 0.5% for the week.

Amazon said sales had climbed by 9% in the first quarter of the year to $127.4bn, above the company’s own financial forecasts.

It recorded a profit of $3.2bn, compared to a $3.8bn loss in the same period a year ago. It was the company’s strongest quarterly profit since 2021.

The Bureau of Economic Analysis advance estimate of first quarter US gross domestic product (GDP) showed the country's economy grew at 1.1.% annual rate in the first quarter. Economists surveyed by Bloomberg had expected 1.9% growth.

Naeem Aslam, chief investment officer at Zaye Capital Markets, said: "Traders know that the US economy is experiencing a difficult time, and it is pretty much a given that the Fed is going to increase the interest rate. This means that earnings are going to be adversely influenced further in the coming quarter, and the US economy will face further slowdown.

Read more: Interest rates: Barclays income from consumers surge 47% as homeowners pay higher loans

"Nonetheless, it is amazing to see that the US stock indices are still performing relatively well. For instance, the Dow Jones industrial average logged its best percentage gain yesterday since January this year.

"This means that risk appetite among traders is still extremely strong, despite the fact that there is serious fear about the US banking crisis. This week, we have seen plenty of new information come to light as the US regional banks reported earnings and their deposits depleted further."

Asia-Pacific markets largely rose on Friday after the Bank of Japan kept its monetary policy unchanged.

Tokyo’s Nikkei 225 (^N225) gained 1.40% to 28,856 points, while the Hang Seng (^HSI) in Hong Kong rose 0.85% to 20,008. The Shanghai Composite (000001.SS) climbed 1.13% to 3,323 points.

Sony (6758.T) posted annual profits thanks to a strong performance in its music and computer chips businesses, even as it predicted that profits would dip in the current year.

The Japanese tech company expects operating profit in the year to March 31 to fall 3.2% to 1.17tn yen ($8.65bn).

Private bank rescue talks around First Republic

US officials view a private-sector deal to rescue First Republic (FRC) as preferable to the bank falling into Federal Deposit Insurance Corporation (FDIC) receivership, according to Reuters.

The FDIC, the Treasury Department and the Federal Reserve are among the government bodies that have started to orchestrate meetings in recent days about pulling together a lifeline for the regional lender.

JPMorgan (JPM), which has been acting as First Republic’s banker and is the largest US lender, is involved in the conversations, but other large institutions are also likely to participate in some way.

Read more: NatWest profits surge on the back of higher interest rates

First Republic’s share price has dropped by 95% since it was caught up in the regional banking frenzy sparked by the collapse of Silicon Valley Bank.

First Republic said in a statement: "We are engaged in discussions with multiple parties about our strategic options while continuing to serve our clients."

Pound

The pound’s (GBPUSD=X) rally against the dollar gained traction yet again, with sterling trading at $1.2566.

Sterling (GBPEUR=X) was flat against the euro, trading at €1.1337.

Oil markets

Meanwhile, Brent crude (BZ=F) gained ground and was trading at around $79 per barrel despite mixed economic signals.

“Oil markets have completely faded the boost from the surprise OPEC+ cut earlier this month, and we think this primarily reflects deep pessimism about the macro outlook, with little evidence of incremental weakness in demand so far,” Barclays analysts said.

Watch: Amazon's first quarter earnings call: What you need to know

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