Tech stocks drive Wall Street higher while FTSE 100 closes in the red

The FTSE 100 and European stocks finished lower on Wednesday after banking fears were reignited on Wall Street.

The FTSE 100 (^FTSE) lost 0.50% to close at 7,851 points, while the CAC 40 (^FCHI) in Paris tumbled 0.93% to 7,461 points. In Germany, the DAX (^GDAXI) fell 0.47% to 15,797.

First Republic Bank’s (FRC) shares closed nearly 50% lower yesterday, a day after the troubled US bank announced a $100bn (£80.27bn) slump in deposits, sparking fears that it could be the third bank to fail after the collapse of Silicon Valley Bank and Signature Bank.

FTSE 100

The UK’s blue chip index struggled to make gains as encouraging updates from a number of companies weren’t enough to offset concerns over US banks.

Standard Chartered (STAN.L) said first-quarter pretax profit jumped 21%, beating expectations, as rising interest rates buoyed cash management income and retail product sales for the emerging markets-focused lender. Shares were up 2.87%.

GSK (GSK.L) also beat expectations for its first-quarter revenue and profit, helped by sales of its shingles vaccine Shingrix.

The London-listed drugmaker reported adjusted profit of 37 pence per share on revenue of about £7bn. The company’s shingles vaccine, Shingrix, generated £833m.

Shares were down 3.69%, however, as the firm warned it expects no further revenues from its coronavirus-related treatments.

The number of new homes built by London-listed Persimmon (PSN.L) slumped by more than 40% in the first three months of 2023, following a slip in demand amid soaring mortgage rates. Still, shares were up by over 5.14% as the housebuilder said there were some encouraging signs

US and Asia

US stocks pointed up Wednesday, led by the Nasdaq, as investors start to digest the big tech earnings bonanza that has kicked off this week.

The Dow Jones (^DJI) was flat at 33,518 points. The S&P 500 (^GSPC) rose 0.28% to 4,082 points and the tech-heavy NASDAQ (^IXIC) jumped 1.14% to 11,915.

Alphabet (GOOGL) reported first quarter earnings on Tuesday that beat expectations on the top- and bottom-lines, while also authorising a massive $70bn stock buyback. Alphabet stock rose as much as 5% in after hours trading on the news.

Microsoft (MSFT) shares rose after the software giant’s fiscal third quarter earnings per share of $2.45 beat Wall Street estimates of $2.23. Revenue of $52.9bn came in above expectations of $51.02bn.

The tech giant reported Azure and other cloud services revenue growth of 27% year-over-year for the quarter. Analysts had been anticipating a slow down in cloud revenue.

Meta (META) earnings are up next after the bell on Wednesday, while Amazon (AMZN) reports Thursday.

In Asia, markets were mixed lower, with Tokyo’s Nikkei 225 (^N225) losing 0.71% to 28,416 points, while the Hang Seng (^HSI) in Hong Kong gained 0.82% to 19,778. The Shanghai Composite (000001.SS) finished flat, at 3,264 points.

Japanese automaker Honda Motor Co.’s (7267.T) shares fell 0.7% after the company announced plans to step up its shift to electric vehicles.

Investors will also be closely watching the Bank of Japan monetary policy meeting later this week, the first to be led by new BoJ chief Kazuo Ueda.

Bank fears mount

A selloff of First Republic Bank shares continues, sinking almost 50% Tuesday after the regional lender reported on Monday that customers withdrew more than $100bn during the first three months of the year.

That excludes $30bn in deposits that big banks plugged in to build faith in their rival after the second- and third-largest US bank failures in history.

Investors have been eyeing the performance of regional lenders since the failures of Silicon Valley Bank and Signature Bank last month, which sparked fears of contagion.

The shares plummeted 49.4% to $8.10 at market close on Tuesday and are down more than 93% since the start of this year.

On Monday, San Francisco-based First Republic said it was taking steps to shore up its balance sheet and cut its workforce after deposits fell to about $104.5bn in the first quarter of this year from $176bn in the fourth quarter of 2022 despite it receiving $30bn from Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC).

“The First Republic Bank drama revived the bank stress. Even before the US open, the European banks were dragging the European equity indices lower,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.

Pound

The pound’s (GBPUSD=X) rally against the dollar appears to have lost some steam, with sterling trading at $1.2481.

However, the long game remains bullish for the pound, with analysts saying it could go all the way up to the $1.2650 level.

The sterling (GBPEUR=X) was basically flat against the euro, trading at €1.1302.

Oil markets

Meanwhile, Brent crude (BZ=F) climbed and trading at around $80/barrel after a US trade group reported a significant draw in crude oil stocks ahead of the government’s data release.