BP rise helps offset bank falls

Published on Tuesday 27 October 2009 19:32

LONDON FTSE 100 CLOSE 5,200.97 +9.23

BANK shares were further shaken yesterday amid fears over harsher-than-expected sanctions from European regulators as the price of state support.

The worries followed Monday's announcement that Dutch giant ING would split its insurance and banking arms, as European Union regulators demand concessions for the bail-out cash pumped into the banks by national governments.

City firm Keefe, Bruyette & Woods said the ING settlement was far harsher than expected and could have negative implications for some other European banks, including the government-backed UK institutions.

Royal Bank of Scotland fell sharply, down 3.62p at 40.81p, followed by Lloyds Banking Group, which was off 5.5p to 83.84p. Barclays was also dragged down 12.8p at 339.8p. However, better-than-expected third-quarter results from oil giant BP helped to offset the hefty bank losses on the London market, with the FTSE 100 ending the day up about 9.2 points at just under 5,201.

The blue-chip index has gained about 51 per cent since hitting a six-year low in March, though it is still 3.7 per cent below its level of a year ago.

BP shares closed up 5 per cent, or 27.3p, at 594.4p, despite a fall in profits, helping other oil groups to make ground. The company was the centre of attention after posting a 50 per cent fall in profits to $4.98 billion (about 3bn) compared with the same period last year as the much-reduced price of crude took its toll.

Mic Mills, senior trader at ETX Capital, said: "BP provided the FTSE's fuel today, stoking hopes that UK third-quarter corporate earnings will outperform, but there remains enough uncertainty, in a thinly-traded market, to curb overall enthusiasm."

Shell – which is also set to reveal its third-quarter results this week – gained 38.5p to 1,890.5p. BG Group added 9p to 1,132.5p.

Pharmaceuticals groups joined them on the risers board ahead of GlaxoSmithKline's third-quarter results today.

The group is expected to see the benefits of favourable currency fluctuations and a potential boost from its vaccine against swine flu. Glaxo shares rose 26.5p to 1,256.5p; AstraZeneca followed with a 54.5p rise to 2,830p.

In the FTSE 250, directories group Yell recovered from an initial nosedive after it emerged the company had given lenders a further two days to approve its debt restructuring plans.

Shares were down 10 per cent at one stage, but later recovered to stand 1 per cent higher, up 0.5p to 52.5p.

The biggest gain in the second tier was achieved by department store chain Debenhams, which climbed 2.75p to 84.35p after Barclays Capital started its coverage with a target price of 100p.

Back in the FTSE 100, Home Retail Group, which owns Argos and Homebase, was a beneficiary of the same note, with shares up 8.1p to 306.7p after Barclays set a target price of 355p.

However, Punch Taverns shares fell 4 per cent or 3.85p to 86.65p after broker Credit Suisse cut its price target to 146p from 177p, despite last week's favourable Office of Fair Trading decision on beer ties.

Shares in Moodiesburn-based sausage skin maker Devro rose by 3.2 per cent or 3.75p to end the day at 122.25p after chief executive Peter Page bought a further 132 shares through the company's dividend reinvestment scheme, taking his holding to 0.16 per cent.

SeaEnergy, the Aberdeen-based firm formerly known as Ramco, signed a deal with a Taiwanese company to develop wind farms. But shares in the Aim-listed company dipped by 0.75p to close at 47.5p.