London close: Dull end to volatile week
UK stocks reacted positively to better than expected US jobs data, with the Footsie recovering from a negative position to a positive one, but as the day drew to a close, traders quietly banked profits ahead of the week-end.
Though the Footsie ended the day with only a modest rise, it capped a strong week which saw the blue-chip index add 175 points, largely on the back of a rebound by miners.
US JOBS MARKET BETTER THAN FEARED
US non-farm payrolls rose by 103,000 in the month of September, versus a consensus forecast of a rise of 55,000.
On this side of the pond the UK producer price index for the month of September rose at a 0.3% on month (6.3% on year) pace, according to the latest data from the Office for National Statistics. Market consensus has been expecting a rise of 6.2%.
BANKS LEAD THE FALLERS
The banks were the worst performers after Moody's issued a downbeat report on the UK financial sector. Lloyds TSB, Santander UK and the Co-Operative Bank were downgraded one notch, while Nationwide and Royal Bank of Scotland (RBS) went down two levels.
The reasoning for the downgrade was that Moody's wanted to reflect the ending of the UK government's implicit guarantee for all banks. It makes clear in its statement that the downgrade is not a comment on the stability of the British banking system as a whole.
Unsurprisingly, Lloyds and RBS were the heavy fallers. The latter issued a statement saying that it has made "significant progress" in strengthening its credit profile since 2008, when it received a £45bn bail-out from the UK government, leaving the firm 83%-owned by the state. As of 30 June, the core tier one capital ratio stood at 11.1%.
"We are disappointed that Moody's have not acknowledged the progress we have made in strengthening the bank's credit profile," RBS said.
However, an article this morning by the Financial Times, speculated that the firm may have to receive more aid after its core tier one capital ratio factors in the banks' exposure to the escalating debt crisis in Europe. “[RBS’s] sovereign exposure is not fundamentally worrying but if there is a broader European drive to recapitalise the banks it’s conceivable they may need more government money,” a government official told the paper.
Barclays was in the red in sympathy.
HEAVY FALLS ON THE FTSE 250
Premier Foods, the FTSE 250 food manufacturer which has been struggling with rising raw material costs, has admitted that its third quarter results are "significantly below our expectations". Shares dropped over 40% after the group warned that full-year trading profits will be below market expectations.
Finnish nickel and zinc miner Talvivaara Mining lost almost 20% of its market value after chief executive Pekka Pera served notice to quit, as the company goes into cash conservation mode. The company said that, in view of the current volatility and uncertainty in the commodity and financial markets, it has developed a revised operating plan and made the strategic decision to focus on maximising profitability of operations rather than the production volume over the remainder of 2011.
Economic data was deemed beneficial to oil prices, with the most commonly traded futures contracts for Brent crude and West Texas sweet light crude both climbing 25 cents a barrel, the former to $105.98 and the latter to $82.40.
Investors were less keen on government debt, as they piled back in to equities. The benchmark 10-year gilt saw its yield rise almost 8 basis points (i.e. 7/100 of a percentage point) to 2.47%. Yields move inversely to prices.
FTSE 100 - Risers
Vedanta Resources (VED) 1,160.00p +4.22%
Wolseley (WOS) 1,721.00p +4.05%
ITV (ITV) 62.60p +3.39%
InterContinental Hotels Group (IHG) 1,061.00p +3.21%
Weir Group (WEIR) 1,577.00p +3.00%
Kingfisher (KGF) 254.90p +2.99%
Eurasian Natural Resources Corp. (ENRC) 629.00p +2.86%
Man Group (EMG) 167.20p +2.83%
Burberry Group (BRBY) 1,240.00p +2.82%
Xstrata (XTA) 910.00p +2.74%
FTSE 100 - Fallers
Lloyds Banking Group (LLOY) 34.66p -3.36%
Royal Bank of Scotland Group (RBS) 23.62p -3.04%
Glencore International (GLEN) 422.00p -2.35%
British Sky Broadcasting Group (BSY) 675.00p -2.10%
Barclays (BARC) 164.70p -1.88%
Admiral Group (ADM) 1,238.00p -1.67%
Legal & General Group (LGEN) 101.20p -1.65%
Inmarsat (ISAT) 461.60p -1.60%
RSA Insurance Group (RSA) 112.90p -1.57%
Unilever (ULVR) 2,020.00p -1.46%
FTSE 250 - Risers
Thomas Cook Group (TCG) 44.00p +8.24%
Debenhams (DEB) 62.80p +7.35%
International Personal Finance (IPF) 253.90p +6.50%
African Barrick Gold (ABG) 538.00p +6.22%
Morgan Crucible Co (MGCR) 265.60p +6.03%
Soco International (SIA) 340.30p +5.32%
Mothercare (MTC) 189.00p +5.23%
Victrex (VCT) 1,177.00p +5.00%
FTSE 250 - Fallers
Premier Foods (PFD) 5.80p -42.00%
Talvivaara Mining Company (TALV) 205.00p -19.16%
CSR (CSR) 188.00p -5.53%
Ophir Energy (OPHR) 223.70p -5.41%
FTSE TechMARK - Risers
XP Power Ltd. (DI) (XPP) 995.50p +7.04%
Xaar (XAR) 227.00p +4.13%
FTSE TechMARK - Fallers
RM (RM.) 68.75p -4.84%
Emblaze Ltd. (BLZ) 51.00p -4.67%