The FTSE 100 and European stocks were higher on Tuesday as markets continue their rally after the banking industry turmoil of the past few weeks.
The FTSE 100 (^FTSE) rose 0.52% to 7,510 points at the open, while the CAC 40 (^FCHI) in Paris climbed 0.69% to 7,127 points. In Germany, the DAX (^GDAXI) gained 0.55% to 15,212.
Bank of England
Bank of England (BoE) governor Andrew Bailey said a wave of early retirements could force up inflation, leading to higher interest rates.
Speaking at the London School of Economics on Monday evening, Bailey said that a sharp decline in the number of people in the workforce was “part of the reason why we have had to raise Bank Rate by as much as we have”.
That trend, he warned, will drive up prices and mean borrowing costs may need to be higher.
He said: “We should expect this to put upward pressure on inflation in a way that would call for a higher level of interest rates to dampen demand.”
Bailey said the rise in inactivity of people aged 50 to 64 was “particularly striking”.
Read more: UK shop prices hit record high with inflation set to make Easter even worse
Bailey said the BoE had not already decided that interest rates needed to increase further but noted that inflation of 10.4% in February was “much too high”. He stressed that the Monetary Policy Committee (MPC) would assess the “emerging evidence” before opting to lift rates again.
Last week, the BoE raised the Bank rate toto 4.25% — its highest level since 2008.
The European Central Bank, US Federal Reserve and Swiss National Bank have also all raised interest rates this month.
US and Asia
Across the pond, S&P 500 futures (ES=F), Dow futures (YM=F) and Nasdaq futures (NQ=F) were all in the green as trade began in Europe.
Wall Street finished mixed on Monday, as bank stocks moved upward after North Carolina-based First Citizens (FCNCA) bank agreed to buy most of Silicon Valley Bank (SVB).
The Dow Jones (^DJI) rose 0.60% to close at 32,432 points. The S&P 500 (^GSPC) climbed 0.16% to finish at 3,977 points and the tech-heavy NASDAQ (^IXIC) lost 0.47% to 11,768.
Banks will dominate the headlines again this week with the earnings and economic calendars in sight. The Senate Banking Committee will hold a hearing on bank failures on Tuesday, with the witness list including FDIC chairman Martin Gruenberg, Federal Reserve vice chairman Michael Barr, and Treasury undersecretary Nellie Liang.
Read more: Europe tops world for crypto startups with London getting most VC funding, study says
Barr wrote in a statement ahead of the hearing on Monday that the failure of SVB reeked of “mismanagement.”
“To begin, SVB’s failure is a textbook case of mismanagement. The bank had a concentrated business model, serving the technology and venture capital sector,” Barr’s testimony reads.
In Asia, Tokyo’s Nikkei 225 (^N225) rose 0.15% to 27,518 points, while the Hang Seng (^HSI) in Hong Kong climbed 1.10% to 19,782. The Shanghai Composite (000001.SS) lost ground, falling 0.18% to 3,245 points.
FTSE 100
Back in London, Ocado Group (OCDO.L) jumped 5.4% after Ocado Retail, its joint venture with Marks and Spencer (MKS.L) reported a rise in revenue in quarter one.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “A relief ripple is helping stocks make some gains amid hopes that the volatility, which has wracked the banking sector, has eased off.”
“Right now, worries about the impact of banking turmoil are taking a back seat and the Bank of England is intent on steering consumer prices lower. Governor Andrew Bailey stressed in his speech in London last night that interest rates may have to move higher if there were signs of persistent inflationary pressure.”
Spirits maker Diageo (DGE.L) has appointed its first female chief executive after announcing the retirement of Sir Ivan Menezes after a decade in the top job.
Read more: UK braced for further price rises as inflation set to worsen, S&P warns
Debra Crew will step up from her current position as chief operating officer and lead the FTSE 100-listed business from 1 July.
Across the wider FTSE 250 index (^FTMC), gambling company William Hill (888.L) has been hit by a record £19.2m ($23.6m) fine by the UK gambling regulator.
Three gambling businesses owned by the company will pay the sum for “widespread and alarming” social responsibility and anti-money laundering failures, the Gambling Commission said.
Pound vs dollar
The pound (GBPUSD=X) gained ground against the dollar at over $1.23.
Sterling (GBPEUR=X) gained nearly 0.15% against the euro, trading near €1.14.
Oil markets
Meanwhile, Brent crude (BZ=F) lost ground and was trading at around $78 per barrel, with markets focused on developments in the banking crisis and indications of strengthening demand in China.
“Though risks remain in the banking system amid the recent event, dip-buys in crude oil could be the prevailing trend in the near term,” said Tina Teng, analyst at CMC Markets.
Watch: Fed find an SVB buyer… Are we out of the woods?
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