Date: Wednesday 21 Dec 2011
It was a day of two halves for the Footsie, with the morning's gains reversed in the afternoon session in the wake of the result of the European Central Bank's new three-year credit facility.
The European Central Bank allotted €489.2bn in its auction of three-year loans, whereas the market had been expecting between €250bn and €350bn.
The huge take up indicates just how desperate for liquidity some European banks are. The hope now is that they will use the money to lend to European businesses and, perhaps, help the region avoid a recession in 2012, but more cynical observers took the view that the bulk of the funds will simply be used to meet their own funding needs.
Rumours of a French sovereign debt downgrade were also making the rounds, which further soured sentiment.
Lloyds hangs on to gains
Banking stocks were in favour in the morning session but by the close only Lloyds was still holding on to a significant gain, boosted by an upgrade from French broker BNP Paribas Exane.
Global banking giant HSBC surrendered early gains. The company is to offload its private banking business in Japan to Credit Suisse for an undisclosed sum. HSBC said that this deal is in line with its global restructuring strategy outlined back in May that will see 30,000 jobs go. The "Strategy Execution Plan" targeted cost savings of $2.5-3.5bn in order to reach the cost efficiency ratio target of 48-52% by 2013.
Elsewhere in the financial sector, Old Mutual, the South African savings and investment group, edged higher after saying it had agreed terms to sell the Finnish branch of Skandia Life Assurance Company to insurer OP-Pohjola osk. The transaction is part of Old Mutual's plan to streamline its business, with net proceeds after tax going to reduce the group's debt.
Hardy Underwriting jumped after Beazley said it is interested in acquiring its Lloyd’s of London underwriting rival. While Beazley has reassured that this does not represent a firm intention to make an offer, it did confirm its interest in "entering into exploratory discussions" with Hardy.
Low spirts on the High Street
Retailers Tesco, Marks & Spencer and Sainsbury were among the worst performers on the Footsie after the GfK NOP UK consumer confidence index fell to its lowest level since February 2009. The index decreased to -33 points in December from -31 the month before. The market consensus had been expecting a small up-tick to -31.
A negative report on the UK retailers published by Fitch this morning did not help matters. In thee report, the ratings agency says that, “UK retailers face higher risks than their Continental European peers in 2012, says Fitch Ratings. This is due to a combination of a weaker consumer environment and currency, and lower international diversification compared with many Continental European retailers.”
Essar controversy rumbles on
Essar Energy, the India-focused integrated energy company, announced that Ravi Ruia has voluntarily decided to temporarily step aside as Chairman, though he will continue as a director of Essar Energy. This decision follows allegations by India's Central Bureau of Investigation (CBI) that Ruia, along with certain other executives of the Essar Group, and Essar Teleholdings Limited - an Indian company belonging to the Essar Group - had suppressed facts relating to the extent of equity holding of Essar Group in Loop Telecom .
Small caps movers
Chocolatier Thorntons' share price continues to melt away. The company warned its full year profits will miss expectations as consumers continue to cut back and it battles high levels of promotional activity on the high street. Brokers Investec and Merchant Securities hinted that this news may put the level of its dividend at risk.
Hutchison China Meditech rocketed with its MediPharma business entered into a global licensing, co-development, and commercialisation agreement with sector giant AstraZeneca fir a cancer treatment drug. Astra edged higher.
Heading the other way was upmarket travel operator Travelzest which said it has pulled out of bid discussions with Red Label Vacations, as the Canadian company's valuation of Travelzest did not meet the UK company's expectations.
FTSE 100 - Risers
Lloyds Banking Group (LLOY) 24.86p +5.25%
Evraz (EVR) 375.00p +2.74%
CRH (CRH) 1,202.00p +2.39%
Wolseley (WOS) 2,053.00p +2.19%
GKN (GKN) 179.10p +1.99%
Polymetal International (POLY) 1,077.00p +1.99%
Hargreaves Lansdown (HL.) 428.30p +1.88%
Schroders (Non-Voting) (SDRC) 1,034.00p +1.47%
Royal Bank of Scotland Group (RBS) 19.86p +0.97%
Pearson (PSON) 1,185.00p +0.85%
FTSE 100 - Fallers
Essar Energy (ESSR) 172.40p -3.15%
ITV (ITV) 62.15p -3.12%
Vedanta Resources (VED) 1,039.00p -2.90%
Amec (AMEC) 867.50p -2.86%
Marks & Spencer Group (MKS) 301.90p -2.46%
Petrofac Ltd. (PFC) 1,400.00p -2.44%
Centrica (CNA) 278.10p -2.28%
Sage Group (SGE) 285.30p -2.23%
Tullow Oil (TLW) 1,317.00p -2.23%
Sainsbury (J) (SBRY) 286.60p -2.15%
FTSE 250 - Risers
Kenmare Resources (KMR) 43.04p +10.30%
Anglo Pacific Group (APF) 263.20p +5.28%
Ferrexpo (FXPO) 268.90p +5.20%
Computacenter (CCC) 338.10p +4.13%
Spirent Communications (SPT) 110.10p +4.06%
FTSE 250 - Fallers
Ocado Group (OCDO) 53.30p -7.14%
Cable & Wireless Worldwide (CW.) 15.53p -5.30%
Daejan Holdings (DJAN) 2,550.00p -5.03%
Hochschild Mining (HOC) 386.50p -4.73%
Electrocomponents (ECM) 187.30p -3.65%
Home Retail Group (HOME) 79.60p -3.63%
Supergroup (SGP) 479.00p -3.54%
Dignity (DTY) 808.00p -3.29%
Halfords Group (HFD) 291.30p -3.22%
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