FTSE 100 surges as Lloyds and Barclays share prices rebound

We examine some of the key market developments from the week that was.

Key takeaways:

  • FTSE 100 rocketed 8.3% this week, led by bank shares rebounding from their low base.
  • Energy shares could continue momentum next week as OPEC+ production agreement could put a floor under oil prices

FTSE 100 shares surged 8.3% to finish a shortened trading week at a one-month closing high of 5886.1 points. Bank shares rebounded and investors rallied to companies that shored up their balance sheets against the coronavirus crisis.

More gains in the US helped provide momentum for global share indices, including the FTSE 100. The Dow finished the holiday-shortened week up 11.6%, as US stocks posted their best weekly performance since 1974 heading into the Easter break.

Rebounding banks lead FTSE 100 resurgence

UK bank shares led the charge for the FTSE 100 after performing poorly in the first quarter of 2020. Lloyd’s shares rebounded 17% to finish the week at £33.42. The UK banking giant shed half its value in the first three months of 2020.

Barclays shares were just behind Lloyd’s with a rally of 16.8%, while Royal Bank of Scotland finished the week 15.7% higher. HSBC recovered just 4%, although it has fallen far less than some of its rivals since the crisis emerged. Meanwhile, Metro Bank ended the week 7.8% stronger.

The question is whether the banks will fall back again? Since the Bank of England asked the major banks to suspend their dividends, which initially spooked investors, some support could be returning to share prices as investors look for companies taking care of their balance sheets.

On Wednesday, Lloyd’s scrapped cash bonuses for top executives, in a move that will likely please shareholders.

As policymakers grapple with how to restart the UK economy amid a virus that has hospitalised British Prime Minister Boris Johnson and re-emerged in countries like Singapore, which showed initial success, investors may be looking at a period of protracted volatility.

Traditional retail smashed by online

Tesco, Britain's biggest retailer, recovered to finish the week 4% higher, after withdrawing its profit forecast on Wednesday and warning investors that additional costs from the coronavirus pandemic could reach £925 million. Shares in rival retailer Sainsbury fell 8% for the week, while Morrisons slipped 4%.

The news was very different for online retailers, with ASOS not that far off doubling in a week. Shares in ASOS, an online fashion and cosmetics company, closed 84.7% higher as social distancing made online shopping preferable to instore purchases.

The company also received a major boost after raising £247 million via a placement, to help shore up its balance sheet.

Rival online fashion retailer boohoo didn’t fare quite as well, but still finished the week 40.2% higher.

Aero-engine maker Rolls-Royce posted a weekly gain of 33.7%, following a sharp rally on Monday after it secured an extra £1.5 billion revolving credit facility. The manufacturer also announced it would scrap its targets and final dividend.

Diageo, the world's largest spirits maker, ended the week 4.7% stronger despite withdrawing its earnings outlook and suspending capital returns to shareholders.

The FTSE 100 could have ended higher if it weren’t for energy shares weighed down by an oversupplied oil market. Royal Dutch Shell shares rose 2.2%, while BP shares fell 3% for the week.

However, support for energy shares emerged late in the week amid hopes of a production cut. The OPEC+ nations have since agreed to a production cut of 10 million barrels per day, which may boost sentiment around key energy stocks when the markets reopen.

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