Barclays Drags FTSE Lower

Ivaylo
22 Jun, 2007
New York City

The US subprime rate led London financials lower at mid-day trading with Barclays down, trying to alleviate investors

[R]9:30AM The FTSE 100 is lower Friday on weaker banking stocks.[/R]

By mid-day, the FTSE 100 was trading 20 points lower at 6,576.0, a decline of 0.3%.

Advancers

The retail sector was upbeat after a week of selling tracking poor trading updates from Tesco and J Sainsbury. Tesco led the gainers by midday, recovering 2.9%. William Morrison gianed 2.3%. Home Retail Group, the owner of Argos, gained 1.4% and Kingfisher, the company responsible for the B&Q home improvement chain, gained 1.2%.

Pearson, the media company, gained 2.3%, as investors cheered the company’s decision not to join GE to counter New Corp’s bid for Dow Jones.

BAE Systems, defence contractor, advanced 2.4% after a review of its planned acquisition of Armor Holdings of the US was approved by the US Treasury Department.

Decliners

Banks with exposure to the U.S. market dampened the overall market sentiment. Barclays declined 1% after it admitted it had some exposure to the two Bear Stearns funds though it added losses were immaterial. Fund manager Schroder’s was the worst hit, down 1.7%, on its large US exposure.

Royal Bank of Scotland dipped 1.25% as it announced it, and partners Santander and Fortis, expected to come up with offer documents in relation to their bid for ABN AMRO by mid-July.

[R]8:30AM Asia ends lower on bond yield fears, HK bucks trend and gains on China Mobile.[/R]

Asian markets finished lower on Friday. In China, the Shanghai Composite Index plunged 3.3% to end at 4,091. Stocks plummeted in the afternoon session with worries emerging that the central bank will hike borrowing costs over the weekend as inflation rose to 3.4% last month, a two-year high, according to the statistic bureau. Industrial & Commercial Bank of China Ltd., the biggest lender in the country, shed 2.1% and China Vanke Co., the biggest property developer, lost 2.8%.

The Nikkei 225 Average in Tokyo lost 0.3% to settle at 18,188. Property developers and insurers lost the most as higher rates raise operating costs for developers. Mitsubishi Estate declined 3.9%, and Mizuho Bank lost 1.9%. Chip-makers gained, on a jump in the prices of memory chips. Advantest gained 3.6%.

Korea Exchange Bank sank heavily, down 3.4%, as its largest shareholder sold a stake in the bank in South Korea. In Seoul, the Kospi Index shed 1.3% to 1,770. Other financials also dipped in sympathy with Kookmin Bank off 4% and Hana Financial Group shedding 1.7%. In Australia, the market ended almost flat. Australia''s benchmark index S&P/ASX 200 edged 0.1% lower to 6,382. Although financial stocks finished higher, Caltex pulled the market lower, dipping 10.4%.

HK bucked the trend and advanced. The Hang Seng Index gained 0.2% to close at 21,999. China Mobile lifted the index, soaring 2.8%, while profit booking weighed on oil stocks. Cnooc dipped 1.8% and Sinopec lost 1.4%.

[R]7:30AM NY – 6:30PM Mumbai Sensex ends lower in a highly volatile session.[/R]

The Sensex on BSE finished 31.88 points, or 0.22%, lower at 14,467.36.

The market-breadth was almost even as 1,274 stocks advanced, 1,280 declined and 86 were unchanged. Of the 30 stocks in the Sensex, 11 advanced, while all the rest declined. The turnover on BSE was Rs 5,302 crore, almost the same as Rs 5,307 crore on Thursday. On NSE, the turnover was Rs 9,521 crore, lower than Rs 10, 388 crore on Thursday.

Economic news

India’s wholesale inflation rate slowed to a thirteen-month low in the second week of June as the prices of food, fruit, lentils and cereals decreased. Wholesale prices advanced to 4.28% in the week ended June 9 from a year ago but down from 4.8% the previous week lower than estimates for inflation rate of 4.45% for the period.

The widespread interest in the second offering from ICICI Bank kept the rupee on the rise for a second straight week. The rupee also advanced as Indian companies take out loans abroad as the interest rates in dollars are lower than those in rupees. The rupee gained 0.4% to 40.695 against the dollar this week.

The government today approved 36 proposals for special economic zones. Among those which were approved were 3 Navi Mumbai SEZs jointly offered by Reliance India chief Mukesh Ambani and Anand Jain.

The failure of WTO talks among four trading groups representing rich and poor nations failed to resolve differences. The trade talk disputes have hinged on the farm subsidies paid in the rich countries to support small farm communities. There are more than 700 million farmers in Brazil and India living on less than one dollar a day and in the U.S. less than 0.5% of population works as a farmer. India’s two third of population relies on farming and generate less than 30% of its GDP. In the U.S. less than 1% of population rely on farming generating less than 4% of its GDP.

Trading highlights

TCS was the most-active stock with a turnover of Rs 562 crore followed by Time Technoplast and Reliance Industries.

Advancers

Reliance Energy surged 5.3% to Rs 590. The company submitted a bid for the for the 4,000-MW Sasan ultra mega power project. The stock was also given a boost by the Bombay High Court decision on gas deliveries by Reliance Industries.

NTPC surged 1.7% to Rs 153 on the Bombay High Court’s decision, that Reliance Industries was not required sell gas produced from one of its major blocks in the Krishna-Godavari basin to any one other than Reliance Natural Resources and NTPC. Hindalco gained nearly 1.9% to Rs 170 on market talk that promoters are raising their stake in the company.

Capital goods large-cap Hindustan Unilever advanced 1.2% to Rs 192 and housing finance company HDFC gained a 1.7% to Rs 1,880.

ICICI Bank was among the most active stocks, but the stock was volatile. It rose 0.4% to Rs 954 after its secondary offering attracted bids nine times the offer size. The issue closed today.

Decliners

BHEL plunged 2.8% to Rs 1,440, while cement stocks declined on heavy selling pressure. Gujarat Ambuja Cement dipped 2.6% to Rs 116, ACC was off 0.6% to Rs 85 and Grasim lost 0.5% to Rs 2,495.

Index heavy Reliance Industries lost 1.7% to Rs 1,704, on a petition by RNRL to the high court which had ordered yesterday after trading hours that the 81.6 million cubic meters of gas per day could be sold only to RNRL or NTPC.

The rise in the rupee impacted IT stocks negatively. Satyam Computers lost 1.1% to Rs 462, TCS was down 0.4% to Rs 1,140, Infosys declined 0.3% to Rs 1,951, and Wipro dipped 1.3% to Rs 517.