Stock market report: Monday close

By Mickey Clark for MailOnline
Updated:

 

Holding shares in the big banks should come with a health warning these days. HSBC, Europe's biggest bank, slumped 24% last week, wiping £15bn from the company's stock-market value.

The sign and logo of the London Stock Exchange

News week: Economic data this week will set the agenda for shares

The slide continued in Hong Kong this morning, with the price tumbling to its lowest in 13 years as hedge funds began shorting the shares ahead of going ex-rights later this week.

That selling spilled over into London, where HSBC's price slumped 11¾p to 349p, after touching 310p. Dealers said that the short sellers were being motivated by the likelihood of HSBC shares continuing to weaken in the wake of its deeply-discounted rights issue to raise a record £12.5bn at 254p.

But the early focus of attention was on Lloyds Banking Group after it reached agreement over the weekend to join the government's asset-protection scheme relating to £260bn worth of dodgy assets.

Lloyds, in which the government now has a 77% majority stake, touched 36p before the bears moved to square up their short positions. The price later settled 1.7p dearer at 43.7p. Goldman Sachs says Lloyds is now 'substantially' less risky, but warns it comes at a price of considerable dilution.

Deutsche Bank says participation in the scheme materially improves capital ratios in the short term and buys the bank precious time. But weak profits and a sliding capital base will keep investors apathetic. It has repeated its sell rating and 35p target. Bernstein has slashed its target for Lloyds from 110p to 50p, but keeps its market-perform rating, while Nomura rates the shares reduce with a 42p target.

The Lloyds share price has collapsed from around 260p since September when the merger with rival HBOS was announced. Lloyds reported last week that HBOS lost a massive £10.8bn last year. Barclays, which has to decide soon if it wants to join the government protection scheme on assets, fell 3.4p to 61.4p. Another loser was Royal Bank of Scotland, down 0.8p at 19p.

Shares generally traded above their worst levels of the day but were still down at a new six-year low. The FTSE 100 index, which fell 300 points, or almost 8%, last week, reduced its ended up 11.67 points at 3542.4. New York had to contend with another volatile start to trading this afternoon, which included a futures-related sell-off. Prices later steadied, but investors continued to reflect upon Friday's disastrous non-farm payrolls. The Dow was left nursing a loss of 65.1 to 6561.7.

Traders say the dramatic fall in the stock market during the past couple of weeks suggests life assurers may soon have to liquidate parts of their portfolios to preserve solvency ratios. Legal & General shed a further 1.8p at 23p and is now regarded as just traded-options money. There were also losses for Prudential, down 2¼p at 207p, and Friends Provident, 2.9p at 54.8p. But Aviva bounced off the bottom with a rise of 13.7p to 177p, despite the threat of a credit-rating downgrade by Moodys.

Shares in the London Stock Exchange fell 34¼p to 370p after Nomura cut from buy to neutral and lowered its target from 600p to 560p. It favours Deutsche Börse instead.

Morgan Stanley has slashed its target for miner Anglo American from 1450p to 1235p, while slashing rival Xstrata from 750p to 330p. The broker has made its move on Xstrata, 26¼p off at 298¼p, to take into account the rights issue, and Anglo American, down 14½p at 966½p, to reflect full-year earnings.

Stand by for better-than-expected full year results tomorrow from Mears, the social-housing builder and care-homes operator, down 4p at 241p. Pre-tax profits should come in at around £20m, up from £15.45m last time. Later this week Mears may be included for the first time in the FTSE 250.

Builders also attracted support. Bovis Homes put on 17p at 395p following full-year results which dealers judged could have been a lot worse. Berkeley Group rose 26½p to 902½p after UBS tweaked its target 22p higher to 1087. The broker says Berkeley is in a position to take advantage of land-buying opportunities without borrowing.

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

Close Brothers chief executive Colin Keogh presents the blue-blooded investment bank results for the last time. Rising impairment rates, falling management fees and trading volumes at Winterfloods will be investors' main concerns in the half-year figures. Preben Prebensen steps into Keogh's shoes in April.

Baker Greggs and miner Antofagasta are among the other companies reporting. Broker Numis expects the pies and pasties maker to unveil annual pre-tax profits of about £45m, with like-for-like sales up 4.4%. The mining group is tipped to report lower profits than last year after as drop in copper prices.

Some links in this article may be affiliate links. If you click on them we may earn a small commission. That helps us fund This Is Money, and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

Most watched Money videos

{"status":"error","code":"499","payload":"Asset id not found: readcomments comments with assetId=1669965, assetTypeId=1"}