London close: Equities drop on worries about Deutsche Bank and financial sector

Deutsche Bank weighed down the financial sector following reports that a number of key hedge funds had reduced their exposure to the lender led by John Cryan, which currently faces a $14bn fine from the US Department of Justice for mis-selling mortgage-backed securities.

However, the stock pared some losses on unconfirmed reports that a settlement with the DoJ might be announced over the weekend.

FTSE 100-listed banks Lloyds Banking Group and Barclays were weaker on the back of that same negative sentiment towards the sector.

In economic data, UK gross domestic product in the second quarter was revised higher by the Office for National Statistics. GDP rose 0.7% rose in the three months to the end of June, up from a previous estimate of 0.6%. On the year, however, the economy grew 2.1%, down from the previous estimate of 2.2%.

Howard Archer, chief UK and European economist at IHS, said: “News that services output grew 0.4% month-on-month in July in the immediate aftermath of the Brexit vote is a significant boost to third quarter growth prospects; consequently we are lifting our third quarter growth estimate to 0.4% quarter-on-quarter from 0.3%.”

A separate report from Nationwide showed UK house price growth eased in September amid worries about the impact of Brexit on the market. House prices rose 0.3% month-on-month in September to an average of £206,015 following a 0.6% increase in August. On an annualised basis, house prices grew 5.3% this month after a 5.6% gain in August.

Consumer confidence in the UK recovered sharply in September, picking back up to the levels seen before the referendum vote, GfK revealed. GfK's gauge of consumer sentiment rose from -7 points in August to -1 in September, versus economists' forecast for a reading of -5.

In the Eurozone, the annual rate of inflation doubled in September to 0.4%, in line with expectations, as the impact of weaker energy prices began to fade. Core inflation, which excludes unprocessed food and energy, was stable at 0.8% versus expectations of a nudge higher to 0.9%.

The Eurozone unemployment rate was steady compared to the previous month at 10.1% in August. This was a touch weaker than expectations for it to nudge down to 10%, but it remained at the lowest rate recorded in the bloc since July 2011.

In Asia, a private gauge of China manufacturing showed a further expansion in September activity. Caixin’s purchasing managers’ index increased to 50.1 in September from 50.0 in August, above the 50 level that separates an expansion from a contraction.

Japan’s consumer price index fell 0.5% year-on-year in August, in line with forecasts, compared to a 0.4% drop in July.

Across the Atlantic, US data from the Commerce Department showed personal income rose 0.2% in August, as expected by analysts. Personal spending was flat, compared to forecasts for a 0.1% increase.

The US PCE deflator increased 1.0% year-on-year in August, up from 0.8% in July. Excluding food and energy, core prices rose by an annualised 1.7% in August, compared to 1.6% in July.

The final reading of the University of Michigan's consumer sentiment index showed a rise in September to a level of 91.2, up from 89.8 in August. Economists had expected a reading of 90.

Among corporate stocks, luxury fashion retailer Burberry was on the front foot after RBC Capital Markets upgraded the stock to ‘sector perform’ from ‘underperform’ and lifted the price target to 1,400p from 1,200p as it upped its earnings per share forecasts, largely due to a bigger FX tailwind.

Capita was under the cosh for the second day running after the outsourcer warned on Thursday that full year-profits will be some way short of current forecasts after its third quarter was hit by a slowdown in some areas, oneoff costs and recent hesitation among clients.

Peppa Pig owner Entertainment One gained after saying interim trading had met management’s expectations and that its full-year financial performance would meet its own forecasts.

Tullow Oil gushed higher as it said it has received confirmation from its lead insurers that there is a recoverable claim with respect to the group's corporate policy for Business Interruption insurance following damage to the Jubilee turret bearing earlier this year.

Market Movers

FTSE 100 (UKX) 6,899.33 -0.29%
FTSE 250 (MCX) 17,871.42 0.04%
techMARK (TASX) 3,486.06 -0.31%

FTSE 100 - Risers

Barratt Developments (BDEV) 494.30p 4.53%
Persimmon (PSN) 1,815.00p 4.25%
Marks & Spencer Group (MKS) 331.10p 3.11%
Taylor Wimpey (TW.) 153.60p 2.40%
Burberry Group (BRBY) 1,379.00p 1.92%
Travis Perkins (TPK) 1,544.00p 1.85%
Ashtead Group (AHT) 1,271.00p 1.76%
InterContinental Hotels Group (IHG) 3,180.00p 1.73%
Tesco (TSCO) 183.00p 1.69%
Provident Financial (PFG) 3,033.00p 1.44%

FTSE 100 - Fallers

Capita (CPI) 670.00p -4.01%
Rio Tinto (RIO) 2,574.50p -2.26%
Sky (SKY) 894.00p -1.81%
St James's Place (STJ) 948.00p -1.76%
Prudential (PRU) 1,366.50p -1.73%
Glencore (GLEN) 212.15p -1.71%
Lloyds Banking Group (LLOY) 54.55p -1.69%
Admiral Group (ADM) 2,049.00p -1.68%
Centrica (CNA) 228.20p -1.55%
London Stock Exchange Group (LSE) 2,790.00p -1.52%

FTSE 250 - Risers

Entertainment One Limited (ETO) 225.90p 6.01%
Tullow Oil (TLW) 253.10p 5.41%
Bovis Homes Group (BVS) 871.00p 4.19%
Bellway (BWY) 2,369.00p 3.68%
Berkeley Group Holdings (The) (BKG) 2,584.00p 3.11%
Crest Nicholson Holdings (CRST) 450.00p 3.00%
Domino's Pizza Group (DOM) 372.90p 2.70%
Weir Group (WEIR) 1,700.00p 2.53%
Redrow (RDW) 399.30p 2.25%
JRP Group (JRP) 134.00p 2.21%

FTSE 250 - Fallers

Evraz (EVR) 160.90p -5.07%
OneSavings Bank (OSB) 253.70p -3.76%
IP Group (IPO) 167.80p -3.51%
Drax Group (DRX) 305.40p -3.48%
Electra Private Equity (ELTA) 4,308.00p -3.19%
Carillion (CLLN) 247.90p -2.56%
Allied Minds (ALM) 326.70p -2.45%
Daejan Holdings (DJAN) 5,590.00p -2.44%
CMC Markets (CMCX) 199.90p -2.25%
Acacia Mining (ACA) 497.50p -2.16%