FTSE 100 close: London slumps as Natwest shares crater after Rose review
London’s FTSE 100 closed the week down almost one per cent, while Natwest’s shares plummeted on the outcome of its review into former boss Dame Alison Rose.
The capital’s premier bluechip index ended the day well in the red, after showing signs of being steady throughout most of Friday.
By midday it was up around 0.10 per cent, but fell to -0.86 per cent by the close at 7,291.28. Meanwhile the more domestically-focused FTSE 250 index was up, by about 0.5 per cent to 7,291.28.
FTSE 100 ended the week overall down by 1.43 pee cent, as it continued to dip being dragged four per cent into the red this month overall.
Many investors are looking towards the so-called ‘golden quarter’ in the run-up to Christmas, with Brits saving their cash for big purchases next month, and in December.
Natwest’s shares were down by 11.57 per cent, after it announced the outcome of an internal review into the conduct of former Natwest boss Dame Alison Rose.
The lender said she made an “honest mistake” when she leaked confidential information about Nigel Farage’s finances to the BBC, as it refused to disclose whether she would be getting an expected pay-out.
It also revealed in its third quarter results, a vital profitability indicator slipped. Natwest’s net interest margin – the gap between lending rates and the interest it pays – slipped below 3 per cent in the last quarter as the bank responded to the end of central banks’ global rate hikes.
However profitability across the group remains higher than in the year before, with profit for the first nine months of the year sitting at £3.3bn compared to £2.3bn in the same period last year.
AJ Bell investment director Russ Mould said while the Rose fiasco has taken headlines, “investors didn’t take long to turn their attention to an equally damaging profit downgrade. Guidance on the net interest margin has been lowered as any benefit from higher interest rates seems to be evaporating.
Elsewhere, International Consolidated Airlines Group, the owner of British Airways, also saw its shares drop this morning by more than two per cent, before levelling off to end the day marginally in the green.
This comes after IAG has posted record-level third quarter results as demand for European holidays increased while fuel costs dip.
Operating profit in the quarter rose to €1.7bn, up from €1.2bn in the same period last year, and operating margin increased 3.6 per cent thanks to strong holiday demand, especially to European destinations.
Meanwhile, profits at British Airways alone topped £600m in the period, whilst Vueling – the group’s low cost offering, enjoyed record profits of nearly £250m.
Mould added their figures “were pretty stellar as it beat forecasts”.
“If the first post-Covid summer season in 2022 was something of a damp squib thanks to airport disruption, this time round the recovery in the airline space has been truly impressive.
“The question now is: is this as good as it’s going to get?”, saying Brits’ disposable incomes are not going to be strong for a long time, especially given global tensions’ impact on oil prices.
“When you add concerns about IAG’s debt position to the mix, it’s easy to see why today’s update got raspberries rather than garlands from the market.”
FTSE 100 could also be flat as investors wait on crucial US data, out later this afternoon. and as they mulled results from Amazon overnight, which showed that third-quarter net income jumped to $9.9bn from $2.9bn.
CMC Markets analyst Michael Hewson said the numbers were “impressive”.
Eyes also turned to US personal consumption expenditure figures – the Federal Reserve’s preferred measure of inflation – at 1330 BST. This softened to 3.7 per cent as expected.
This comes after blockbuster growth figures were announced yesterday, with the US economy growing at 4.9 per cent at an annualised rate between July and September, much faster than the 4.2 expected by economists.
Today’s figures follow on from a string of signals that the US economy continues to withstand pressure from the Fed’s rate hikes, making its next decision a crunch one.