Bad day for banks as RBS leads the Footsie down

Published on Tuesday 1 July 2008 21:19

LONDON FTSE 100 CLOSE 5,479.9 -146.0

ROYAL Bank of Scotland yesterday gained the unenviable title as the worst performing banking stock in a blue-chip bloodbath that saw the FTSE 100 plunge more than 2.5 per cent.

RBS tumbled 5.1 per cent, or 11p, to 204p, after touching an intraday 52-week low of 199.8p, amid concerns that asset writedowns and loan defaults could rise as the economy enters a sharp slowdown or even a recession.

The Footsie finished 146 points down at 5,479.9 after touching its lowest level in more than three months. It gave up a 1.7 per cent gain recorded on Monday.

The UK benchmark index has lost nearly 13 per cent from January to June after five consecutive years of gains and compared with a 6.2 per cent rise in the first half of 2007.

Jeremy Batstone-Carr, head of private client research at Charles Stanley, said: "We could see more uncertainty and possibly more writedowns. It's too early to be buying the banks.

"I would expect to see, if not in Q3 then over the second half, the beginning of a rotation out of defensives into more cyclical sectors of the market, but I don't think we could say that this is going to happen now."

Sentiment was also knocked by fresh fears over the health of the UK housing market as figures from Nationwide showed an eighth successive monthly fall in house prices.

Meanwhile, the Chartered Institute of Purchasing and Supply/Markit purchasing managers' index revealed the lowest activity among UK manufacturers since the aftermath of 9/11. Financials were suffering following the dire house price data. Barclays fell 10p to 281.5p and HSBC retreated 21.25p to 754.5p.

HBOS slipped 7p, or 2.5 per cent, to 269p, closing below its rights issue price of 275p. With every sign that the slump in the housing market is intensifying, the rights issue is heading for a debacle with millions of shares left with the underwriters.

Miners were hit hard after analysts expressed disappointment from contract prices for chrome. Eurasian Natural Resources lost nearly 12 per cent, or 158p, to 1,175p, with Ferrexpo another big loser, off 36p at 359p.

On the retail front, Carphone Warehouse was a top-four faller – down more than 7 per cent, or 14.4p, at 183.5p – in a difficult session for the sector.

Oil prices hovered above $142 a barrel, but failed to help majors BP and Royal Dutch Shell, down 13.75p at 569.5p and 39p at 1,981p respectively.

BT was one of a handful of Footsie stocks in positive territory as investors sought a safe haven in the telecoms sector, lifting it 2.1p to 202p.

Healthcare products giant Reckitt Benckiser was the top performer, rising 2 per cent, or 52p, to 2,597p, as investors bought its defensive qualities.

In the second tier, reports of a refinancing deal with banks gave housebuilder Barratt Developments strong early impetus but it slipped back, ending the day down 1.25p at 56.75p.