Stock market report: Tuesday close

By Mickey Clark for MailOnline
Updated:

 

The FTSE 100 index bounced back today with a strong showing by banks continuing the rollercoaster ride

The sign and logo of the London Stock Exchange

Taking stock: The Footsie is expected to struggle in early trading

It was a better session for HSBC following yesterday's sell-off, which saw the shares slump to their lowest in 14 years. That was prompted by hedge funds selling the shares short ahead of them going ex-rights this week.

They rallied 50p to 399p on news that Hong Kong authorities have launched an investigation into a late sell-off in yesterday's auction.

Also making up lost ground in the financial sector were Legal & General, up 3.7p at 26.7p, Old Mutual, 4.7p ahead at 35.5p, and the UK's biggest hedge-fund operator Man Group, gaining 20.3p at 175.8p.

Barclays recovered an opening fall to close 6.1p up at 67½p. Brokers say Barclays may be put off the Government's asset-protection scheme by the cost of the insurance, which in the case of Lloyds Banking Group, up 7.1p at 50.8p, reached £15bn, and may result in the Government raising its stake by as much as 77%.

Macquarie Research has raised Lloyds from underperform to neutral. The revival of the financial sector breathed fresh life into the rest of the market.

It also accounted for more than 35 points of the 172.8 point advance in the FTSE 100 to 3715.2. London was also boosted by a blistering start to trading on Wall Street this afternoon, with the Dow surging back through resistance levels to post a rise of 254.32 points to 6801.37. Such has been the pace and scale of the stock-market sell-off since the start of the year that the profile of the benchmark FTSE 100 index is set for another major makeover.

When soundings are taken at the close of business tonight, at least six blue-chip companies could face the chop. Four of those come from the financial and property sectors - among some of the hardest hit by the credit crunch and the recession.

They include private-equity investor 3i and, ironically, shares in the London Stock Exchange itself. Property developers Hammerson and Liberty International also face relegation.

A clutch of property companies, including Hammerson, up 6p at 223p, have been forced to tap shareholders this year for extra cash in order to reduce debts in the face of collapsing commercial property values.

Shares in the LSE, up 32¼p at 402¼p, have slumped from 510p since the start of the year, reflecting the drop-off in turnover. Back in their heyday, they were driven toward 2000p by five bid approaches.

3i, up 18.1p at 194.3p, has also suffered, with the value of its investment portfolio dropping sharply, pushing up its gearing. It started 2009 at 272p. Liberty International, up 24½p at 305¾p, specialises in developing shopping centres and has been hit by the collapse in property values and retail spending.

It has fallen from 478p since the start of the year. Others facing the chop include buses and trains operator FirstGroup, 7.1p firmer at 205p, and the world's biggest plumbing equipment supplier Wolseley, 19p better at 161p, which last Friday was forced to tap shareholders.

Among those being promoted are another two mining companies - Mexican-based Fresnillo, 13p better at 387p, and Lonmin, up 138p at 1216p - and oil-industry services provider Petrofac, 4¾p better at 472¾p.

Also likely to make an entry is discount airline easyJet, 4¼p cheaper at 291p, along with Foreign & Colonial Investment Trust, up 5½p at 195¾p, and services provider Intertek, up 38p at 899½p.

Companies making up the FTSE 100 usually qualify on the size of the their free-float stock market capitalisation. Up to 15 companies could drop out of the FTSE 250 index, notably logistics outfit Wincanton, 5¼p dearer at 116¾p property developer Brixton, 2¾p lighter at 15p, Shanks, ¾p less at 52½p, telephone directories publisher Yell, static at 15½p, and Punch Taverns, 1¼p better at 34p.

They could be replaced by old favourites such as Premier Foods, unmoved at 27¾p, Taylor Wimpey, ¾p higher at 18p, Electronics group Pace, 5p cheaper at 75p, and social housing group Mears, 1p up at 242p.

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