Opportunities as UK banks, Relx and Rentokil slide

A bleak session for Wall Street banking giants today chilled Barclays (LSE:BARC) and Lloyds Banking Group (LSE:LLOY) as the lenders joined Rentokil Initial (LSE:RTO) at the bottom of a lacklustre FTSE 100 index.

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The shares of JPMorgan Chase & Co (NYSE:JPM), Morgan Stanley (NYSE:MS) and Citigroup Inc (NYSE:C) slid by between 3% and 5% at last night’s close after sentiment was shaken by a combination of US tariffs uncertainty and rising bad debt fears caused by the threat of an AI-led surge in unemployment.

The US weakness accelerated the results season selling of UK financial stocks, even though Standard Chartered (LSE:STAN) today lifted its dividend by 65% and pleased with its forward guidance.

Lloyds retreated towards the 100p threshold, down by another 2.1p to 101.7p having fallen from the 112.6p seen in the days after its annual results in late January.

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Barclays fell 7.3p to 455.7p, which compares with 486p prior to the results-day presentation of a three-year plan to return at least £15 billion via dividends and share buybacks.

The pressure on NatWest Group (LSE:NWG) since it spooked investors with its £2.7 billion acquisition of Evelyn Partners, resumed as shares fell 8.6p to 601.8p. They had been above 700p earlier this month.

The potential for more tariff threats in President Donald Trump’s State of the Union address to Congress tonight also kept investors on the sidelines, as the FTSE 100 index reached midday broadly unchanged for a second successive session.

AI disruption fears last night continued after Anthropic’s launch of its Claude Code AI tool caused International Business Machines Corp (NYSE:IBM) shares to slump 13% in their worst session since the bursting of the tech bubble in 2000.

The software segment of the S&P 500 fell by 4% to its lowest level since the Liberation Day turmoil, while the VIX index of volatility neared its year-to-date high.

The pressure was felt across the UK software and tech sector, including at RELX (LSE:REL) as the Elsevier journals and LexisNexis business returned to the red with a fall of 22p to 2,229p.

Fidelity International said this week that the recent AI-driven market volatility has presented one of the most compelling backdrops for value investors in recent years.

Alex Wright, the portfolio manager of Fidelity Special Values Ord (LSE:FSV) Trust and Fidelity Special Situations W Acc fund, said: “The last time it felt this opportunistic was during the Covid-19 pandemic, when many high-quality companies traded at deeply depressed valuations even as fundamentals began to stabilise.”

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Over the past six months, Fidelity has increased exposure to staffing companies including FTSE 250-listed PageGroup (LSE:PAGE) and the All-Share stock SThree (LSE:STEM).

Wright said: “Investors have viewed staffers as vulnerable to disintermediation long before the emergence of AI. More recently, concerns about automation and job displacement have intensified those fears. However, we have yet to see clear evidence that AI has structurally impaired these businesses.”

The biggest fall in today’s FTSE 100 index session was by Rentokil Initial after the pest control firm lost the Buy recommendation support of Deutsche Bank.

In a note headed “Crawling back into the woodwork”, the bank downgraded to Hold with a reduced price target of 465p. Shares were today 14p cheaper at 445.3p.

It said “Rentokil is a global market leader in an attractive and defensive category, and is a business that we think should deliver growth at least in-line with the industry and a margin profile that befits a market leader in the space.

“Our analysis shows Rentokil's Pest Control category is significantly under-earning compared to the leading international peers.” The company reports annual results on 6 March.

Closing the growth and margin gap to peers will be the responsibility of US-based Mike Duffy, who takes over from long-time chief executive Andy Ransom in mid-March.

However, Deutsche Bank is wary that increased investment to improve organic revenue growth - even if the right course of action - could place pressure on near-term forecasts.

The best performance in the FTSE 100 was by medical devices firm Convatec Group (LSE:CTEC) after it upgraded medium-term organic growth guidance to 6-8% from 5-7% previously.

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Convatec, whose businesses are focused on wound, ostomy, continence and infusion care, said product launches and operating margin expansion underpinned a strong performance in 2025.

A stronger-than-expected second-half showing meant earnings per share rose 16% on an adjusted basis to 17.6 US cents. The dividend rose 13% to 7.244 US cents, including plans to pay 5.367 US cents on 28 May.

Convatec said the successful implementation of its strategy and “rich innovation pipeline” drove the stronger medium-term guidance. Shares jumped 24.4p to 251.4p, which is the highest level since July.

UBS, which had a price target of 375p prior to today’s results, said that consensus estimates should move up slightly for 2026 and more materially for 2027.

It noted that last night’s Convatec valuation multiple was “pretty much the lowest since 2019” and pricing-in concerns on the ability to even meet existing consensus forecasts.

Bank of America, which had a price target of 295p, said the strong results and increased visibility into 2026-27 reinforced its positive view on Convatec.