London close: Hike in banks' capital buffers hits shares
A stronger sterling weighed on the FTSE on Tuesday, as it emerged the Bank of England will force banks to further bolster their capital buffers to deal with bad debts .
At the close, the FTSE 100 was down 0.17% to 7,434.36, and the FTSE 250 was 0.80% lower at 19,526.80. In Europe, the Dax, Cac 40 and Euro Stoxx 50 were lower. Wall St made thin gains.
The BoE said in its Financial Stability Report earlier today that banks would be made to set aside an extra £11.4bn in the next 18 months to protect themselves against bad loans.
A further drag on the FTSE 100 was sterling strength, with the UK currency gaining on the dollar but falling on an in-form euro.
Propelling the single currency higher, ECB chief Mario Daghi said "a considerable degree" of stimulus was needed in the Eurozone compared with a previous call for "very substantial" stimulus.
He also said he was happy with the progress of the bloc, but was happy to keep monetary policy on hold due to muted consumer inflation.
David Madden, market analyst at CMC Markets UK, said the FTSE had held up relatively well in comparison with its continental counterparts.
Insurers, utilities, pharmaceuticals, leisure and property stocks were all falling, with miners and banks thick to the downside.
"Miners like Glenore, BHP Billiton, Rio Tinto and Anglo American are the biggest gainers on the day after China revealed that profits at industrial companies jumped by 16.7% in May," said Madden.
"British banks pushed higher throughout the trading day even though the Bank of England (BoE) financial stability report called for banks to put aside £11.4bn in cash over the next 18 months, in order to give themselves a financial buffer against bad debts," he said.
Barclays, RBS, Lloyds, HSBC and Standard Chartered were all advancing.
IG market analyst Joshua Mahony said sterling's and euro's gains had taken the shine off proceedings for exporters.
"News that the SNP have formally abandoned their plan for a second referendum before the completion of Brexit has helped the pound’s ascent, with GBPUSD hitting the highest level in a week."
He also noted the IMF had cut its outlook for the US economy, which, when considering the negative path of core PCE inflation, made a September rate hike increasingly unlikely.
In the meantime, Confederation of British Industry figures revealed sales volumes on the High St perked in June but were expected to stall again in July.
The latest poll by YouGov released early on Tuesday showed consumer confidence in the UK fell sharply in the 12 days after the general election, hitting its lowest level since the aftermath of the Brexit vote.
Looking at specific blue-chip stocks, Engineering group GKN was on the back foot, with traders pointing to read-across from Germany's Schaeffler, which cut its profit outlook.
Compass Group was on the back foot after a share consolidation.
Retailer M&S fell after a disappointing updater from Debenhams, which warned full-year profits could be towards the lower end of the current range if market volatility continues.
Market Movers
FTSE 100 (UKX) 7,434.36 -0.17%
FTSE 250 (MCX) 19,526.80 -0.80%
techMARK (TASX) 3,595.58 -0.81%
FTSE 100 - Risers
Glencore (GLEN) 287.65p 3.77%
Rio Tinto (RIO) 3,157.00p 3.27%
Anglo American (AAL) 1,006.00p 3.23%
Antofagasta (ANTO) 774.50p 3.13%
BHP Billiton (BLT) 1,168.00p 2.36%
Standard Chartered (STAN) 757.10p 1.77%
G4S (GFS) 334.50p 1.49%
Barclays (BARC) 202.80p 1.45%
Tesco (TSCO) 169.00p 1.32%
Royal Dutch Shell 'A' (RDSA) 2,088.50p 1.11%
FTSE 100 - Fallers
Compass Group (CPG) 1,663.00p -4.62%
GKN (GKN) 331.20p -4.31%
Admiral Group (ADM) 1,994.00p -2.25%
Centrica (CNA) 204.30p -2.25%
Ashtead Group (AHT) 1,575.00p -2.17%
Paddy Power Betfair (PPB) 8,455.00p -2.14%
National Grid (NG.) 985.40p -2.03%
TUI AG Reg Shs (DI) (TUI) 1,127.00p -2.00%
Direct Line Insurance Group (DLG) 354.80p -1.96%
Marks & Spencer Group (MKS) 336.60p -1.95%
FTSE 250 - Risers
Ferrexpo (FXPO) 198.20p 5.69%
Vedanta Resources (VED) 618.00p 5.09%
Kaz Minerals (KAZ) 493.70p 4.86%
Hunting (HTG) 480.40p 2.52%
Sirius Minerals (SXX) 33.16p 2.35%
Wood Group (John) (WG.) 668.50p 2.30%
FDM Group (Holdings) (FDM) 803.50p 2.23%
Amec Foster Wheeler (AMFW) 487.00p 2.14%
Tullow Oil (TLW) 151.70p 2.09%
Virgin Money Holdings (UK) (VM.) 272.00p 2.06%
FTSE 250 - Fallers
Northgate (NTG) 449.90p -16.17%
Hikma Pharmaceuticals (HIK) 1,515.00p -4.77%
William Hill (WMH) 250.70p -4.46%
Polypipe Group (PLP) 386.50p -4.09%
Playtech (PTEC) 962.50p -3.12%
Auto Trader Group (AUTO) 378.40p -2.92%
Carillion (CLLN) 189.90p -2.91%
Pennon Group (PNN) 853.50p -2.90%
Hochschild Mining (HOC) 274.60p -2.76%
Nex Group (NXG) 639.00p -2.67%