Banking Stocks Lead UK Lower

123jump.com Staff
15 Aug, 2007
New York City

FTSE traded lower in the afternoon reflecting the general weakness in the European markets. Investors remained cautious after the U.S. credit market volatility continue to dominate news. The Bank of England minutes of meeting showed that committee members voted unanimously to keep rate unchanged. Northern Rock fell 5.3% leading the losers in the FTSE 100 stocks.

[R]12:00PM New York, 5:00PM London - European stocks finished lower tracking other shares in Asia and US. Confidence crisis in financial stocks persisted in UK and European trading.[/R]

European stocks dragged marginally lower on the declines on Wall Street and in Asia, as investors’ worldwide hedge against spreading U.S. mortgage markets risk. Financial stocks took a battering but regional indexes recovered from sharp losses earlier on. Paris led the decliners with a loss of 0.7% followed by 0.56% loss in London. Germany rose 0.28%.

In London trading FTSE 100 lost 0.56% to 6,109.30 dragged by bank stocks. Investors fears over the U.S. credit crunch dragged financials and brokerages. The pound fell to 1.99 per dollar and 67.65 pence against euro after the Bank of England minutes of meeting showed unanimous vote to maintain the key bank rate at 5.75% for this month. The members of the committee remain focused on controlling inflation and few expressed concerns about the level of capacity utilization and output prices. The bank also said that it is too early to judge the impact of the past rate increases on the consumer spending.

Banks shares skid sharply on lower earnings forecast. Of the 102 stocks in the FTSE 100 index, 68 declined, 29 increased, and 5 were unchanged. Northern Rock led the index stocks with loss of 5.3% on weaker earnings expectations, followed by losses in Experian group of 3.93%, and 3.8% in Schroders plc. Royal Bank of Scotland and Standard Chartered fell by more than 2%. Mining stocks Anglo America and BHP Billiton fell over 1%. Persimmon led the index stocks with a gain of 3.72% while Barrat DEV and Scottish Newca firmed 2.77% and 2.24% respectively. Hammerson jumped 2.2% followed by increases in ITV of 2%, 1.8% in Unilever, 1.5% in Rexam and Reuters Group.

Lower earnings predictions have hit hard on Northern Rock. The bank has lost 9.4% in value since January anchoring UK’s bank stocks year-to-date growth index. In the first interim net income at 188.2 million pounds was up 0.2% Analysts expect full-year earnings at 213 million pounds.

In Frankfurt trading DAX 20 rose 0.28%, the only notable mover across the region spurred by news Germany was free of US mortgage market concerns. Finance Minister Peer Steinbrueck indicated Germany would not feel the effects the US credit market crisis. The German economy is expected to grow by 0.4% in Q3, up from 0.3 in Q2. Industrial shares rallied with Bayer AG up 5.37%. Deutsche Luft RG added 1.56 percent while Volkswagen gained 1.30%. Deutsche Bank was not sparred from the regional bank stocks’ free-fall losing 2.51%. Deutsche Boerse lost 2.67% with Hypo Real Estate shedding 2.48%

In Paris trading CAC 40 fell 0.66% pulled down by bank shares. Confidence in financials shares remained weak amid weaker earnings forecasts caused by the US credit market problems. Societe Generale crashed 2.3% while BNP dragged 1.5% Arcelor Mittal lost 61 cents, or 1.4%. AXA SA (CS FP) eased 1.2%. Uniliver Ny rose 1.79%, France Telecom added 1.51%. Kon Kpn Nv was up 1.06%.


Nestle SA reported net income in the half year to June was up 18% to 4.92 billion francs. EPS rose similarly to 12.6 francs. Sales were jumped 8.4% to 51.1 billion. The company plans a share repurchase worth $21 billion. Nestle stocks lifted 9.5% in Zurich.