London Markets: FTSE 100 rallies to level not seen in weeks as investors pile into Barclays after results

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London’s main stock exchange on Wednesday powered to a level not seen since before pandemic worries began hitting home for investors, helped in large part by big gains for Barclays.

The FTSE 100 UKX, +2.01% climbed to 6,017.31, a gain of nearly 1% on a day, outpacing a Stoxx Europe 600. If the index closes at that level, it would mark the best finish since March 6, when the index slumped 3.6%, finishing at 6,462.

Barclays was nearly the top performer in the index, up nearly 8%, after the bank posted a 42% profit fall in the first quarter as it set aside 2.1 billion pounds ($2.6 billion) to deal with losses from loans impacted by the pandemic. But compensating for that was record quarterly revenue by its investment bank.

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“What do you say about the bank results when investors seem so happy to ignore larger credit provisions — more than double in the case of Barclays — and the risks associated with a sharp recession and potentially prolonged recovery?” said Craig Erlam, senior market analyst at OANDA, in a note to clients.

Russ Mould, investment director at AJ Bell, said investors may want to think though their enthusiasm for banks, given record-high global indebtedness and drops in near-term incomes for governments and corporations. And banks are being roped into being part of the solution via cheap credit or other solutions.

“None of this is good for net interest margins, which are already under pressure thanks to record low interest rates and bond yields which central banks are working hard to manipulate lower, compressing yield curves and credit spreads as best they can,” he said, noting Barclays’ net interest margin sagged again in the quarter.

Elsewhere, shares of WPP WPP, +7.89% climbed over 7% after reporting first-quarter results ahead of expectations, though that was a 3.8% drop in like-for-like sales. “March exit rates also suggest second-quarter 2020 consensus like-for-like growth of -27% appears sensible and possibly conservative,” said a team of analysts at UBS led by Richard Eary.

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WPP also announced cost-cutting measures, such as over 3,000 workers with salaries above certain levels have already committed to give up 10-20% of their salary for an initial 3-month period, the team noted.