FTSE 100 set for flat start to April as traders gawp at Deliveroo IPO wreckage

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Some said it would hit confidence in the whole sector and put founders off listing in London. They noted that JustEat-Takeaway shares fell sharply in London as well as Deliveroo. Others said it was just a Deliveroo-specific problem, with bankers having priced the offer too greedily.

Whatever the causes, investors will be closely watching the shares’ behaviour on day two of Deliveroo’s life in public. Traders will be curious to know how much of the greenshoe option – shares kept aside by the float’s brokers – are being deployed to “stabilise” (for which read “prop up”) the price.

The FTSE 100 was set to rise just 4 points to 6727.8 as traders’ minds turned to thoughts of a long Easter break.

With markets relatively volatile, few were likely to want to take big bets long or short ahead of a four day break in which, as the good ships Ever Given and Archegos proved this week, anything could happen.

Some investors said the date of the Deliveroo float could have helped harm its prospects. Few fund managers would have wanted to take what was always going to be a risky bet on the last day of the quarter. However, others said the float would have flopped on any day of the year given its overly optimistic pricing.

Banks are still reeling from the Archegos hedge fund blow up, with shares in the sector weak again yesterday. Reports today said the debacle would lead Wall Street to rein back the lucrative swaps business that has generated huge profits for the banking sector there.

It is through swaps that banks enable hedge funds to make hugely leveraged bets on shares and other asset classes.

While lucrative when the trades go well, as Credit Suisse and Nomura found to their cost with Archegos, they can be hugely expensive when markets move against them.

Current rules allow funds to take up swaps with multiple firms without informing the lenders of their total exposure elsewhere. That means the banks cannot properly price the risk of something going spectacularly wrong for overly borrowed clients.

For example, they may feel reassurance that, if something goes wrong, they can sell their exposure to another bank, when in reality they can’t because those banks are also exposed, the FT points out.

European markets were expected to have a flat session after French president Emmanuel Macron launched a four-week lockdown from Saturday.

Traders fret that the move is not accompanied by much prospect of the country boosting its hopeless vaccine programme. Like most of Europe, France has vaccinated less than 12% of its population compared with the United Kingdom’s 45.5%.

As CMC Markets analyst Michael Hewson put it in a note to clients: “The main concern is Macron may well have left it too late after 59,038 new infections were reported yesterday… It’s hard to see an end point to the crisis in Europe.”

The mood in the US continues to be more bullish amid optimism of a further $2 trillion stimulus package there in infrastructure spending on top of last month’s $1.9 trillion stimulus bill.

Hopes over the impact on the US economy of all that spending is currently outweighing concerns about how much taxes US corporations will have to pay to fund it.

As ever in London’s oil-laden FTSE 100, much will depend today on the price of crude. This may be volatile as the Opec+ cartel gathers to decide whether to increase production. Oil prices have risen strongly so far this year albeit with a few poorer sessions lately amid concerns over Covid’s impact on European demand.

IG was calling Brent crude up 0.7% before trading began this morning.