Refinitiv Newscasts - Reuters Today: UK lenders pass the Bank of England's stress tests

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12/07/2023 09:31

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Source: Reuters

Description: Britain's eight largest lenders all have enough capital to cope
with higher rates, the central bank announced following its annual 'stress
test' of the sector. But bank officials warned that the wider financial sector
faced risks from a “highly uncertain” economic outlook and a
“challenging” environment for risk.
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Video Transcript:

The Bank of England says that UK lenders would be resilient if an economic
crisis were to take hold. Welcome to Reuters Today, I'm Ramzan Karmali. The
UK's top eight banks would continue to be resilient in an economic environment
much worse than the one they currently face, that's the verdict from the Bank
of England's latest stress test. The central bank said that lenders are well
positioned to support households and businesses through a period of rising
interest rates, and that the economy was coping with higher rates, though it
will take time for the full impact to feed through. However, bank officials
warned that the wider financial sector face risks from a highly uncertain
economic outlook, a view shared by many economists.

I think we're going to see very low levels of growth. And probably also
actually a mild recession at the end of 2023, early 2024. And I'm not
expecting to see inflation back at target until well into the late 2020s. So,
while there are very, very small sliver of hope in the form of the higher
participation rate, it's mostly downside risks for the time being.

Well, let's check the action on Europe's equity markets now. And European
equities opened higher ahead of US inflation data out later today, which is
expected to show inflation easing to 3.1% on a yearly basis. The FTSE 100 was
up partly on the back of high metal prices which lifted mining stocks. Among
stocks on the move today, well, UK bank shares rose including Barclays after
the results of that stress test, which also boosted the FTSE 100. The European
Medicine Agency extended its probe into Nova Nordisk’s diabetes drugs,
Ozempic, following two reports of suicidal thoughts to include other drugs in
the same class. Its share price is down despite Morgan Stanley raising its
price target. Shares in About You, the German online fashion retailer surged
after reporting Q1 earnings above expectations. And British pub group, JD
Wetherspoons, has forecast its full year profit to be in line with market
estimates, betting on strong demand, and a slight easing in energy costs. Its
shares are also higher. Oil prices have barely moved as markets weighed a
possible build in US crude stockpiles and economic concerns against planned
supply cuts by the world's biggest oil exporters and hopes for higher global
demand. The yield on the 10-year gilt initially jumped after the Bank of
England stress test was released, but is now falling again. Sterling jump to a
15-month high against the Dollar, bolstered by bets the Bank of England will
have to tighten monetary policy further to tame inflation, which is running at
the highest rate of any major economy. The Dollar did sink against its major
peers in the lead up to today's US inflation data, though. Well later today, a
Parliamentary committee will scrutinize key water industry bosses as concerns
mount over the financial viability of Britain's water suppliers. Thames Water,
which the government has looked into potentially nationalizing given its
substantial debt pile as well as the regulator Ofwat, will both feature. The
US and other members of the G7 will announce long term security commitments to
Ukraine at the NATO summit today. A senior US official said that they would
help Ukraine build a military that can defend itself and deter future attack.
Leaders from the G7 group of industrialized countries are attending the NATO
Defense Alliance’s 2-day summit being held in Vilnius, Lithuania,
alongside Ukrainian President Volodymyr Zelenskyy. Under the commitment, there
will be an arrangement over defense equipment, training, and intelligence
sharing. And that's it from your Reuters Today