Stock market report: Wednesday close

 

A request by the chairman of the Treasury Select Committee for the Financial Services Authority to bring back the ban on short-selling among banks, saw stock market bears rush to cover their positions this afternoon.

City trader in front of screens

Market watcher: Latest stock market prices

The request was made after another turbulent time for the major banks in recent days that saw their value slashed to little more than option money. It enabled banks already contained within the Government's "golden circle" to claw back some of their recent losses but it was hard work.

Royal Bank of Scotland rallied 2.2p to 12½p on turnover of 312m while the enlarged Lloyds Banking Group firmed 0.3p to 45.1p after earlier touching a record low of 33p, as a total of 110m shares changed hands. Despite the rally, investors remain worried by the growing prospect of full nationalisation for both companies.

Citigroup continues to rate RBS a buy but has cut its target from 100p to 35p after the sharp fall in the price. It says nationalisation remains a possibility, and RBS will continue to be a volatile investment. The market has lost confidence the bank has sufficient capital.

Barclays struck a record low with a fall of 6.8p to 66.1p on turnover of 275m shares, despite its assertion that it remains in rude financial health. the City is less convinced and is worried about further big write-offs and the possibility of it turning to the Government for extra funding - making it another bank on the fast track to nationalisation.

HSBC put on 30½p at 515½p but traders say it still has a £20bn shortfall on its balance sheet. Standard Chartered, which recently completed a round of funding, rallied 76½p to 766p. Most institutional income funds have already been tempted to dump banking shares because of its uncertain outlook and absence of dividends.

Sandy Chen, banking analyst at Panmure Gordon, says the low share prices of UK banks make further significant dilution for current shareholders likely, as bankruptcies, unemployment and forced asset sales increase. Shares in general rallied from opening falls. But set against the gloomy backdrop of a worldwide economic slump, a banking system in meltdown and talk that sterling may eventually reach parity with the Dollar, investors are in no mood to stick their heads above the parapet.

"It has been a dreadful start to 2009, and it is difficult to see any scope for improvement short term," said one disgruntled trade

Jim Rogers, co-founder with billionaire George Soros of quantum Fund, gave a downbeat assessment of prospects for the UK economy, saying: "I would urge you to sell any sterling you might have."

He and other forecasters worry the Government's latest measures to get banks lending money will push up debt levels to unsustainable levels, creating further weakness in the pound. The Footsie also had to contend with several companies going ex-dividend. These included interdealer broker Icap, which was down 4p at 250¾p, and Imperial Tobacco, which fell back 113p to 1827p stockbroker Hargreaves Lansdown firmed 1½p to 167½p after Citigroup raised its rating on the shares from hold to buy. It also jacked up its target from 165p to 190p.

AIM-listed Judges Capital put on 4½p to 64p on the back of a strong second-half performance. The scientific instruments manufacturer said profits for the full year would be comfortably ahead of expectations. The company also reported that it has a record order book. The FTSE 100 index briefly flirted with the 4000-point level before finishing 31.52 points lower at 4059.88. Shares bounced back on Wall street tonight as some bears there also began covering short positions. The Dow rose 134.05 points to 8083.14 but traders described it as something of a dead cat bounce. The problems of the us banking industry continue to weigh on sentiment.

City coverage and share tips

This is Money carries breaking City news throughout the day. Bookmark Companies & Markets and try these markets links...

Newspaper graphic and pen

Tomorrow's agenda

Grocery chain Wm Morrison is tipped to emerge as the big Christmas-season winner among the supermarkets. Analysts expect chief executive Marc Bolland to unveil a bumper jump of between 7% and 9% in like-for-like sales, beating the growth reported by Tesco, Asda and J Sainsbury. Market research group TNS suggests Morrisons is continuing to claw customers away from its competitors. Sector analysts say that its Market Street fresh- produce aisle and its discount and organic ranges are likely to have been the star performers. Morrisons plans to open at least 46 new stores this year, its biggest expansion programme since it bought Safeway in 2003.

Low-cost airline easyjet issues a first-quarter trading update. it is expected to admit demand is falling as the downturn puts people off flying, but the impact of declining passenger numbers will be offset to some extent by the oil-price fall. Founder Sir Stelios Hajiioannou has backed down in a row with management over easyjet's ability to finance new aircraft buys and whether it should pay a dividend.