Banking Stocks Weigh on FTSE 100

Ivaylo
31 Jan, 2001
New York City

The market in UK declined on Wednesday in spite of the takeover battle for Corus which ended on a positive note for the shareholders in the Anglo-Dutch steelmaker. However weakness in financial stocks dragged the benchmark index lower as F&C Asset Management gave a warning that it would reconsider its dividend on a sharp decline in assets. The FTSE 100 was trading lower 23.3 points at 6,218.7 by mid-day on Wednesday.

[R]9:30AM-2:30PM London The UK benchmark index dipped Wednesday on financials.[/R]
The FTSE 100 declined 23.3 points and was trading at 6,218.7 by mid-day on Wednesday.

Economic news

House prices in the UK increased during January at their slowest pace in eight months. The average price of a house was 173,225 pounds, up 0.3% on December, the smallest increase since last May and a much weaker increase than the 0.8% predicted by analysts.

Decliners

F&C Asset Management gave a warning it would have to readjust its dividend after a sharp decrease in assets under management. The group admitted that AUM had declined 20%, dragging F&C shares 17.2% lower. The news also hit Friends Provident, which is the controlling shareholder of lF&C with a 52% stake. Friends Provident lost 4.9% while Legal & General retreated 1.9% and Aviva lost 0.8%.Other financial stocks also dropped, as Royal & Sun Alliance fell 1.7% and Alliance & Leicester gave back 1.3%.

Tobacco stocks also declined as Morgan Stanley cut its rating on the European sector from attractive to in-line. Imperial Tobacco lost 1.2% and British American Tobacco was down 0.8%.

Advancers

Vodafone gained 1.7% as the mobile phone company posted better-than-expected key performance indicators for Q3 as it acquired more than 200 customers. B&Q owner Kingfisher rose 2% after JP Morgan lifted its recommendation on the stock from neutral to overweight.

Satellite broadcaster BSkyB was in line with forecasts with a 10% increase in first-half revenues though pre-tax profit fell to 356 million pounds from 390 million pounds after 84 million pounds of losses at its start-up broadband venture. Shares advanced 0.92%. Wallpaper supplier Walker Greenbank announced full-year profits would exceed market expectations. The company surged 8.52%.

[R]7:30AM Asian markets end lower Wednesday on Shanghai poor performance.[/R]
Asian markets finished lower on Wednesday. The Shanghai Composite Index plunged 4.9% to 2,786, its biggest single-day loss in eight months. Large-capitalized companies declined sharply on increased worries over high stock valuations. China United Telecommunications plummeted 9.3%, China Petroleum & Chemical dived 8.8% and China Vanke plunged 9.4%.

Japanese Nikkei Index also slipped 0.6% to end at 17,383. Shares in Sony closed 1.4% lower after the company Tuesday announced a 5.3% drop in Q3 net profit. Nikko Cordial dived 15% after it was revealed that senior executives had been involved in manipulating earnings at the brokerage.

The Hong Kong Hang Seng Index shed 1.7% to 20,106. China Mobile, the second-largest constituent of the local benchmark index by market capitalization after HSBC, slid 3.2% after rising 3.1% Tuesday. South Korean Kospi Index declined 0.8% to 1,360. Korea Electric Power declined 3.1% on an increase in global oil prices. Hynix Semiconductor finished 1.7% lower, reducing gains on concerns its earnings could decline sharply in Q1.

AustraliaN S&P/ASX 200 decreased 0.7% to close at 5,773. Profit-taking was the reason for the the stock market decline after strong gains Tuesday. Stocks that led the rally Tuesday were hit the most Wednesday, with QBE Insurance ending 2.2% lower. Taiwan index ended 0.5% lower at 7,700.

[R]6:30AM European markets are flat Wednesday, as financials pull stocks down.[/R]
European markets egded lower on Wednesday. By mid morning, the FTSE 100 in London lost 0.1% to 6,238.0, Frankfurt Xetra Dax shed 0.3% to 6,769.70 and the CAC 40 in Paris slid 0.4% to 5,620.6.

Advancers

Amsterdam-listed Corus gained 6.6% as Tata Steel of India won the bidding war with CSN of Brasil. Expectations for consolidation in the sector are still high as the offer by Tata for Corus followed on closely from Mittal Steel buying Arcelor. Shares in Arcelor Mittal were up 1.5%, German ThyssenKrupp added 1.3%, Salzgitter rose 1.8% and Finnish stainless steel group Outokumpu gained 0.8%.

Banco Popolare di Verona e Novara advanced, despite weakness in the banking sector, after HSBC maintained its overweight position and raised its price target. Last week, the Bank of Italy cleared the proposed merger of BPVN with Banca Popolare Italiana. BPVN shares gained 1.3%, while BPI added 0.9%. Novo Nordisk, the Danish drugmaker, gained after reporting a 13% rise in full-year operating profits. The shares gained 0.9%.

Decliners

Financial stocks declined after several sessions of gains. Commerzbank of Germany fell 0.4% as its Polish division BRE Bank decided not to pay an annual dividend despite posting net income had more than doubled in 2006.

Infineon fell 2.4% after Goldman Sachs removed the German chipmaker from its conviction buy list after the stock recent strong performance. Carmakers were also lower, with Porsche off 1.7% and Peugeot down 2.5%.

Oil and gold

Oil prices declined Wednesday as the market awaited the weekly U.S. inventories report. Crude oil for March delivery fell 39 cents to $56.90 in electronic trading on the New York Mercantile Exchange. Brent crude for March delivery dipped 36 cents to $56.03 a barrel on the ICE Futures exchange in London. Gold fell in London as the dollar gained against the euro. Gold for immediate delivery in London traded at $645.60 an ounce in early trade, down 0.3%.

Currencies

The US dollar traded at $1.2934 against the euro in early trade in London, from $1.2970 late yesterday in New York. The dollar was trading at 121.50 yen, down slightly from 121.62 yen late Tuesday in New York.

[R]5:00AM Gold and silver advanced Tuesday amid thin trading, copper also gained.[/R]
The most-active February gold advanced $1.00 to end at $644.20 a troy ounce at the New York Mercantile Exchange. March silver ended 12.5 cents higher at $13.375. April platinum finished $1,180.60 an ounce, up $5.90 and March palladium closed $341.25 an ounce, down $3.70. March copper settled up 1.95 cent at $2.5615 per pound.

The front-month March crude oil advanced $2.96 to end at $56.97 a barrel. February heating oil gained 8.91 cents to close at $1.6380 a gallon, and February gasoline settled up 8.03 cents at $1.5213 a gallon while February natural gas gained 80.3 cents close at $7.740 per million British thermal units.

On the New York Board of Trade, March Arabica coffee futures declined 0.05 cent to finish at $1.1655 a pound. Futures on raw sugar in foreign ports for March lost 0.04 cent to 10.55 cents a pound, with May off 0.05 cent at 10.75 cents.