UK Gilt Yields Fall as Signs Emerge of Easing -2-

UK's Interest Rates Could Stay Elevated Due to Persistently High Inflation

1150 GMT - The Bank of England is likely to keep interest rates elevated to tame high inflation as the U.K.'s cost of goods and services is expected to remain persistently high, say Bank of America Securities analysts in a note. "We continue to think the U.K. faces a persistent inflation problem," they say. "Therefore we think BOE will be slow to cut interest rates after reaching the terminal rate," BofA says. ([e-mail])

---

European Banking Shares Slump as Fears Linger

1129 GMT - Shares of major European banks are in decline in early afternoon trading as fears linger in the aftermath of Credit Suisse's troubles and weeks after the collapse of Silicon Valley Bank. Germany's Deutsche Bank is suffering the steepest fall, with shares down more than 13%. Commerzbank's shares are down 8.5%. In Switzerland, Credit Suisse shares are down 8%, while UBS is down 7.7%. Shares of France's BNP Paribas are down 7%, while Italy's Intesa Sanpaolo trades 4.4% lower. Austria's Raiffeisen Bank International is down 8.2%, and Spain's Banco de Sabadell is down 7.3%. The STOXX Europe 600 Banks index is down more than 5%. ([e-mail]; @MauroOrru94)

---

UK PMIs Suggest Resilient Activity

1101 GMT - U.K. flash PMIs suggest the economy's strong start to the year was sustained in March, with prices continuing to fall and few signs that a fall in sentiment due to the turmoil in the banking sector crept into the survey, Ruth Gregory, deputy chief U.K. economist at Capital Economics says in a note. The index's services output price index dropped to 59.7 from 62.7, suggesting the Bank of England's closely watched measure of inflation persistence could fall sharply to just more than 5% in the coming months from 6.8% in February, Gregory says. But with the full drag from high interest rates yet to be felt, the economy still looks like it will enter a recession later this year, she says. ([e-mail])

---

UK Retail Sales Came in Strong But Storm Clouds Lie Ahead

1033 GMT - The U.K.'s 1.2% rise in February retail sales is much better than forecast, suggesting that recent resilience in activity hasn't yet faded--even if it's too soon to conclude it will be sustained--Ashley Webb, U.K. economist at Capital Economics says in a note. Together with January's rise, February's increase reversed the large fall in December, though it still leaves sales volumes 3.5% below their level last February, he says. Indeed, with household finances under pressure, it's possible that any improvement in will be just be met by a softening in nonretail spending, such as restaurants, Webb says. With the full drag from higher interest rates yet to be felt, the coming months may still be a struggle for retailers as the economy tips into a likely recession, he adds. ([e-mail])

---

Wetherspoon's Earnings Point to Easing Pressures

1026 GMT - J.D. Wetherspoon's 1H performance shows signs of easing pressures on the sector, IG Group chief market analyst Chris Beauchamp says in a note. "With trading doing better at the start of the year there is finally some hope that a real recovery for the embattled pubco is on the cards," he adds. Shares are up 7.6% to 625.5 pence. ([e-mail])

---

Warpaint's Strong 1Q Sales Drives 2023 Upgrades

1020 GMT - Warpaint is laying the foundations for attractive growth as strong sales looks to continue, Shore Capital analysts Darren Shirley and Clive Black write in a research note. Warpaint reported strong sales so far in 1Q, and as a result, Shore Capital upgrades it 2023 and 2024 pretax profit forecasts by 11% and 15%, respectively, taking the 2023 forecast to GBP11.0 million. "We view Warpaint as an attractive growth company, which remains in the foothills of its U.K. and international growth prospects and ambitions," the analysts say. Warpaint is house stock of Shore Capital and as such the brokerage doesn't provide recommendations. Shares are up 5.1% at 207.5 pence. ([e-mail])

---

Pound Rises Vs Euro But Falls Vs Dollar After UK Data, Bailey Remarks

1007 GMT - Sterling rises versus the euro but falls against the dollar as traders digest the latest U.K. retail sales and purchasing managers' index data along with remarks from Bank of England Governor Andrew Bailey. U.K. retail sales rose 1.2% month-on-month in February, more than the 0.3% increase expected by analysts in a WSJ survey. However, the S&P U.K. composite PMI, which measures services and manufacturing activity, dropped to 52.2 in March from 53.1 in February against an expected 52.6. Meanwhile, Bailey told the BBC's Today program that interest rates will rise further if firms raise prices. GBP/USD falls 0.5% to 1.2214 but EUR/GBP declines 0.3% to 0.8786. ([e-mail])

---

Hostelworld Set for Earnings Upgrades if Momentum Sustained

1002 GMT - Hostelworld's 2022 results demonstrate the company's transformation since the lows of the pandemic, Peel Hunt analysts say in a note. This year has also started strong, with year-to-date performance up 115% compared with 2019 levels, they say, adding that if this persists, Ebitda upgrades could follow. Share recovery still has way to go to reach prepandemic highs of more than 400 pence a share, the analysts note. However, current pricing doesn't account for the progress made in the last few years, they add. "The company that went into the Covid-19 looks very different to the one that has emerged," the analysts say. Peel hunt reiterates a buy rating and target price of 200 pence on the stock. Shares are currently trading at 140 pence.([e-mail])

---

Smiths Group's Margins Below Targets, But Headed in Right Direction

0958 GMT - Smiths Group had another strong half-year as it reported record revenue growth and lifted its full-year outlook, eToro analyst Mark Crouch says in a note. Although the engineering company's 63% 1H operating cash conversion is down on last year's 93%, it says this was down to investment in inventory--to power growth--and that it will return to normal levels in the medium-term, Crouch says. Margins are also below its medium-term targets but they are getting fatter and therefore heading in the right direction, he says. "The firm has a strong order book and will register decent growth in its full-year results, but it's difficult to get carried away when there remains so much geopolitical and economic uncertainty," Crouch says.([e-mail])

---

Bellway's Outlook to Be Scrutinized as Shares Struggle

0955 GMT - Bellway's share price is attempting to recover from autumn lows, but the rally is unconvincing and shares still languish at less than half of their prepandemic peak of early 2020--and they now seem to be losing momentum, AJ Bell says. The house builder's shares have dipped 6.4% in the last month despite anecdotal evidence of improved mortgage availability, as mortgage approvals stand at multi-year lows, interest rates rise further, consumer confidence remains low and inflation persists, AJ Bell analysts say in a research note. Bellway's first-half results on Tuesday will be scrutinized by analysts and shareholders for the 2023 outlook and beyond, particularly concerning reservation rates, completions, pricing and operating profit, the brokerage says. Shares are down 0.8% at 2,018 pence. ([e-mail])

Contact: London NewsPlus, Dow Jones Newswires;

(END) Dow Jones Newswires

03-24-23 0942ET