London close: Stocks fall as Deutsche Bank leads banks lower

London stocks dropped on Friday as news that Deutsche Bank faces a $14m fine in the US sent banking shares into the red.

Deutsche Bank led banking shares lower after saying it had no intention of paying $14bn to settle civil claims with the US Department of Justice regarding its handling of mortgage-backed securities that contributed to the 2008 financial crisis.

Royal Bank of Scotland was under the cosh amid the possibility it could also face a fine from the US authorities for mis-selling mortgage bonds in the run up to the banking meltdown.

Neil Wilson, markets analyst at ETX Capital, said: “RBS could have to pay up to $13bn to settle the claims. Even a third of this figure which deliver a crippling blow to the lender, making its return to profitability even further off. It would also derail plans to return the bank to private ownership any time soon.

“After its latest loss, RBS has notched up £50bn in losses since the financial crisis – more than the £45bn stumped up by taxpayers to save the bank.”

Barclays and Standard Chartered also slumped, with traders apparently shrugging off reports that the latter may spin out its private equity unit to its managers as part of a broader move to reduce the risk profile of its business.

Weighing on sentiment elsewhere, oil prices dropped on news of rising Iranian exports and returning supplies from Libya and Nigeria following interruptions. Brent crude fell 1.19% to $46.04 per barrel and West Texas Intermediate declined 1.5% to $43.23 per barrel at 1618 BST.

In the US, the Labor Department revealed the consumer price increased 0.2% month-on-month in August after being unchanged in July, beating forecasts for 0.1% growth. On an annualised basis, CPI rose 1.1% in August, up from 0.8% in July and more than the 1.0% expected.

Core inflation, which strips out energy and food prices, rose 0.3% month-on-month and 2.3% year-on-year last month following a 0.1% monthly increase and a 2.2% yearly gain in July. Economists had expected a month-on-month rise in core CPI of 0.2% and the same annualised rate as July.

“Growth in consumer prices for August was solid if unspectacular, and today’s data is unlikely to persuade Fed Chair Janet Yellen to pull the trigger on an interest rate hike just yet,” said Dennis de Jong, managing director of UFX.com.

“Analysts had speculated that next week’s Fed meeting could bring with it a rate increase, but a mixed bag of recent financial data could instead see Yellen and Co. err on the side of caution.”

The Federal Reserve meets on 20-21 September to decide on interest rates.

Meanwhile, a report showed US consumer sentiment remained unchanged in September. The University of Michigan’s preliminary consumer sentiment index stayed at 89.5, missing forecasts for a reading of 90.5.

On the company front, private healthcare provider Spire Healthcare surged following a report that peer Mediclinic was preparing a bid for the remainder of the company. Mediclinic’s shares slipped.

Aviation support and aftermarket services company BBA Aviation rose after announcing that, after a number of approaches and a formal review, it has reached agreement with John Menzies on the terms of the sale of commercial aviation services subsidiary ASIG for $202m cash.

Supermarket retailer Wm Morrison gained ground after Exane BNP Paribas upgraded the stock to ‘neutral’ from ‘underperform’ and lifted the target price to 200p from 165p following its first-half results on Thursday.

Acacia Mining shares declined as it said output at its Bulyanhulu operations was being hampered by repeated overheating of the ball mill trunnion bearing.

Market Movers

FTSE 100 (UKX) 6,703.45 -0.40%
FTSE 250 (MCX) 17,796.43 0.25%
techMARK (TASX) 3,488.76 0.49%

FTSE 100 - Risers

TUI AG Reg Shs (DI) (TUI) 1,067.00p 3.89%
Shire Plc (SHP) 5,095.00p 3.22%
Burberry Group (BRBY) 1,301.00p 3.17%
AstraZeneca (AZN) 5,095.00p 2.02%
Provident Financial (PFG) 2,963.00p 1.82%
Morrison (Wm) Supermarkets (MRW) 211.60p 1.68%
Marks & Spencer Group (MKS) 317.40p 1.28%
Glencore (GLEN) 185.00p 1.09%
Next (NXT) 5,005.00p 0.97%
Sky (SKY) 840.00p 0.84%

FTSE 100 - Fallers

Royal Bank of Scotland Group (RBS) 185.60p -4.43%
BAE Systems (BA.) 532.00p -3.01%
Barclays (BARC) 164.70p -2.83%
Standard Chartered (STAN) 607.10p -2.74%
ITV (ITV) 193.10p -2.62%
Coca-Cola HBC AG (CDI) (CCH) 1,682.00p -2.61%
Fresnillo (FRES) 1,607.00p -2.37%
Mediclinic International (MDC) 926.50p -1.59%
BHP Billiton (BLT) 986.10p -1.59%
Schroders (SDR) 2,677.00p -1.58%

FTSE 250 - Risers

Euromoney Institutional Investor (ERM) 1,207.00p 9.43%
Spire Healthcare Group (SPI) 390.00p 8.06%
Galliford Try (GFRD) 1,277.00p 5.45%
Evraz (EVR) 137.90p 5.27%
Pendragon (PDG) 31.80p 4.99%
JRP Group (JRP) 120.70p 4.96%
BTG (BTG) 644.00p 4.63%
Savills (SVS) 764.50p 4.58%
Millennium & Copthorne Hotels (MLC) 454.10p 4.37%
SSP Group (SSPG) 327.10p 3.84%

FTSE 250 - Fallers

Acacia Mining (ACA) 473.00p -5.40%
Centamin (DI) (CEY) 134.70p -5.01%
Investec (INVP) 460.10p -2.62%
Debenhams (DEB) 57.15p -2.39%
Petrofac Ltd. (PFC) 793.50p -2.34%
Bovis Homes Group (BVS) 859.50p -2.22%
Amec Foster Wheeler (AMFW) 535.00p -2.19%
Softcat (SCT) 328.20p -2.03%
Wizz Air Holdings (WIZZ) 1,610.00p -1.83%
Ashmore Group (ASHM) 346.60p -1.62%