FTSE 100 close: Shares stage late retreat
It has been a turbulent day for the Footsie in which it gave up its early gains.
Looking up? There was better news on the banking sector from the US overnight
Having stood more than a hundred points ahead for most of the day, the FTSE 100 index retreated to close just 2.2 points up on the day at 4,398.7.
London shares were hobbled by a downbeat open on Wall St, where the Dow Jones was 93.3 points to the worse at 8,419.0.
David Buick of BGC Partners reckoned the Footsie has just been having too much of a good thing. 'It was a combination of the tech sector in the US giving up the ghost with Verizon and IBM leading the way and an overdue correction,' he said.
'Vodafone has lost 6.2p today [to 121.25p] – the best part of 13 points on the FTSE 100. This pullback is probably down to the dreadful results posted by Deutsche Telekom.'
The pound meanwhile fell by more than 1.7% against the euro and 0.7% against the US dollar after the Bank of England announced an extension to its quantitative easing programme, while keeping interest rates at 0.5%.
The recent recovery among many major bank stocks ground to a halt. Lloyds Banking Group suffered a setback as the HBOS owner warned it expected to make a loss in 2009.
The bank - which is majority owned by the taxpayer - cautioned over a 'significant' rise in write-downs due to the impact of recession on its loan book. Notably, it warned that bad corporate debts would soar 50%.
The trading update warned of further storms ahead due to the commercial property exposures of HBOS, which was salvaged by Lloyds TSB last year, in what has come to be seen as an ill-judged buyout.
Shares in Lloyds plunged 14%, or 16.2p to 97p.
Barclays initially impressed traders with its trading update, which revealed a 15% rise in first-quarter profits. It posted a surplus of £1.37bn in the first three months of 2009 - largely thanks to its Barclays Capital investment banking division - although bad debts jumped to £2.3bn.
Barclays, which has avoided Government support so far, said BarCap's profits had soared after it bought the investment banking business of collapsed Lehman Brothers last year. This pushed the division's pre-tax profits to £907m - 361% ahead of the same period last year.
Online CFD brokers Blue Index reckon the statement vindicated Barclays' credit crunch strategy, and the knock-down price of the Lehman acquisition demonstrates an astute and forward thinking management team.
'We are buyers of Barclays shares, with a short-term target price of 330p,' says Richard Curr of Blue Index. Shares in Barclays fell 12.25p to 275.75p.
HSBC was 16p higher at 555p ahead of its trading statement on Monday, although part-nationalised Royal Bank of Scotland was down 4.1p at 41.6p. It is due to update investors tomorrow.
One of the best blue-chip performances of the session came from consumer products group Unilever, up 10% or 129p to 1443p after higher prices helped the Dove soap to Lipton tea group to post better-than-expected sales growth of 4.8% in the first quarter of 2009.
Guinness-to-Smirnoff drinks giant Diageo also cheered markets after holding firm on profit guidance despite weakening global markets and a 7% fall in underlying sales. Shares were up 4% or 26.5p to 881p.
Legal & General led a continued bounce back from the insurance sector as the strong equity markets provide a boost to their capital strength. L&G rose by 6.5p to 71.9p and Prudential added 15.75p to 441.75.
And analysts say that Anglo-South African insurer Old Mutual's trading update today also calmed investor nerves, with news the company had bolstered its capital position. Shares were 2.9p higher at 70p.
Outside the top flight, housebuilder Bovis Homes lost ground despite revealing a strong sales performance and debt halved to under £50m at the end of April. Shares were 4p down at 450.75p.
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