Barclays shares set to slip ahead of Q3 earnings amid Covid-19 concerns
Barclays will reveal its third quarter earnings on Friday, with the bank’s share price likely to come under renewed pressure as the Bank of England contemplates negative interest rates to tackle the economic impact of Covid-19.
- Barclays set to unveil its third quarter earnings on Friday 23 October
- UK lenders margins under renewed pressure as Bank of England considers negative rates
- Investors hoping that Barclays’ investment unit will offer some reprieve to dim outlook
Barclays will release its third quarter (Q3) earnings on Friday 23 October, with investors hoping that another strong performance from its investment banking unit will help mitigate the impact of the coronavirus pandemic on its bottom line.
Investors’ expectations for Barclays Q3 earnings are low, however, with the bank forced to set aside £3.7 billion to cover a significant rise in bad loans as a result of the economic fallout from Covid-19.
In July, Barclays revealed that it first-half profits fell by 66%, with the lender forecasting further headwinds well into 2021.
‘Given the uncertain economic outlook and low interest rate environment, the second half of the year is expected to continue to be challenging,’ Barclays said.
The myriad of challenges facing Barclays and the wider UK banking sector is expected to put pressure on its share price, with the stock down 43% year-to-date.
Barclays is trading at 104p per share at the time of publication.
Bank of England mulls further stimulus and negative interest rates
In order to provide additional support to the UK economy from the impact of Covid-19, the Bank of England’s Gertjan Vlieghe considered the possibility of adopting negative interest rates and additional stimulus.
‘GDP and labour market indicators stand at levels that are below what has historically been the trough of a recession,’ Vlieghe said.
‘Given that virus prevalence has been increasingly again recently, it is likely to weigh more heavily on economic activity,’ he added. ‘Indeed, it appears that the downside risks to the economic outlook at starting to materialise.’
In a speech on the health of the UK economy earlier this week he warned of a ‘tremendous challenge ahead’ amid rising coronavirus cases that have led the government to impose tighter restrictions across the country.
‘My own view is that the risk that negative rates end up being counterproductive to the aims of monetary policy is low,’ Vlieghe said. ‘Since it has not been tried in the UK, there is uncertainty about this, and the MPC is not at a point yet when it can reach a conclusion on this issue.’
‘But given how short term and long term interest rates already are, headroom for monetary policy is limited and we must consider ways to extend that headroom,’ he added.
FTSE 100 declines halts, yet further losses seem likely
The FTSE 100 has taken a breather following a bearish start to the week yesterday, according to Josh Mahony, senior market analyst at IG.
‘The wider downtrend in play did point towards a likely bearish reversal from the 61.8-76.4% resistance zone,’ Mahony said. ‘With that in mind, further downside looks likely in accordance with the downtrend seen since June.’
‘An upside move could come to bring us back into a deeper retracement at 5981 (76.4%), yet a bearish outlook holds unless we see price rise through the 6041 resistance level,’ he added.
How to trade stocks with IG
- Create an IG trading account or log in to your existing account
- Enter ‘Barclays PLC’ in the search bar and select it
- Choose your position size
- Click on ‘buy’ or ‘sell’ in the deal ticket
- Confirm the trade
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.