Focus on banks hits Footsie

Published on Tuesday 3 November 2009 19:24

LONDON FTSE 100 CLOSE 5,037.2 -67.3

THE London market was sent into a spin yesterday as investor attention fell on financial stocks amid a shake-up of the part-nationalised banks.

Lloyds Banking Group and Royal Bank of Scotland saw contrasting fortunes in the wake of announcement, with the former enjoying an almost 3 per cent rise while the latter slumped nearly 7 per cent.

The wider FTSE 100 index was sent lower – below 5,000 at one stage – amid falls across world markets, and closed down 67.3 points or 1.3 per cent at 5,037.2.

On Wall Street, investors were unnerved by concerns over unemployment and the stability of financial firms in Europe, sending the Dow Jones Industrial Average down 0.8 per cent in early trading.

Jimmy Yates, head of equities at CMC Markets, said: "In what was supposed to be the quietest day of the week, European markets have found themselves yet again on the end of a big sell-off as banks, miners and a weaker oil price weighed on the markets."

In London, Lloyds bucked the trend for falls in the banking sector as weak results from Swiss bank UBS added further fuel to a downturn in sentiment.

Lloyds topped the sparsely-populated risers' board after it announced a 13.5 billion rights issue as part of a 21bn fundraising plan. The bank rose 2.33p to 87.33p as it said it would avoid the UK government's toxic asset insurance scheme.

But Royal Bank of Scotland led the fallers as it was confirmed the government will raise its stake in the bank to 84 per cent.

The group fell 2.72p to 35.93p after Chancellor Alistair Darling confirmed plans to pump in an additional 25.5bn as a result of the toxic debts scheme.

Other banks were also under pressure. HSBC – which revealed plans to shed 1,700 jobs – slipped 22.5p at 667.5p.

Asian-facing Standard Chartered was down 28p to 1,495p, while Barclays slid 6.55p to 323.45p as it also announced details of a major restructuring to its management team.

Aero-engine giant Rolls-Royce was also among yesterday's bigger fallers, losing 8.6p to 443.1p despite a steady-as-she-goes trading update in line with previous guidance.

But chief executive Sir John Rose warned there was "no evidence yet of a sustained and general return to growth" across the group's markets.

In the FTSE 250, budget stores group Dunelm jumped after it said like-for-like sales continued to run ahead of market expectations. The trading update prompted Numis Securities to raise its rating from "add" to "buy" and caused shares to cheer 20.8p to 346.8p – the stock stood at 120p at the start of the year.

Associated British Foods fell 12.5p to 820.5p after it announced full-year results showing profits ahead by 4 per cent to 655 million.

Analysts said the results from the Primark owner were in line with expectations, although cautious comments from the company resulted in some pressure on the stock.

Shares in Weir Group closed down 23.5p, or 3.4 per cent, at 671.5p despite the Glasgow-based engineering company saying that it expects full-year profits to be at the upper end of market expectations.

Irn-Bru maker AG Barr – which yesterday joined trade body Scotland Food and Drink – closed down 12p at 842p.

There were mixed fortunes for Scottish oil companies, with Cairn up 2p at 2,643p and Faroe ahead 1p at 126p, but Dana shed 31p to close at 1,227p and Bowleven lost 1p to end at 85.75p.

Oil prices fell ahead of the start of the US Federal Reserve's two-day meeting to set monetary policy and interest rates.