FTSE close: Barclays down; Invensys, Tullow Oil up

By Adrian Lowery
Updated: 12:49 EDT, 7 September 2010

17.00 (close)

News of changes at the top of banking giants Barclays and HSBC received a lukewarm response from investors today as the wider market ended its recent strong run.

Bob Diamond's promotion to replace John Varley as chief executive of Barclays failed to boost shares, while HSBC also slipped into the red after it announced chairman Stephen Green was to become the Government's new Minister for Trade and Investment.

Fresh concerns over the eurozone brought the Footsie's rally to an end, with the index closing down 31.4 points at 5407.8 - the first finish in the red for seven sessions.

Wall Street's Dow Jones Industrial Average fell 0.7% after official figures showed a bigger-than-expected drop in German manufacturing orders in July of 2.2% month-on-month.

Markets on both sides of the Atlantic were also unnerved by a report in the Wall Street Journal which claimed the EU stress tests of 91 banks in July understated some lenders' holdings of potentially risky debt.

The pound gained ground on a weak euro, up 0.5% to 1.20 euros, but ongoing concerns over the strength of the UK economy hampered progress against the greenback, down 0.3% to 1.53 dollars.

The high profile promotions and departures in the banking sector dominated the stock market in London.

The appointment of American-born Barclays Capital boss Mr Diamond to the helm was met with caution in the City amid worries it could increase emphasis on the riskier investment banking operation. Barclays saw shares drop 3% or 8.9p to 314p.

HSBC shares initially saw a good run after Mr Green announced his departure, but they later dropped 0.4p to 662.4p.

Meanwhile, a cautious note on the retail sector from brokers at HSBC meant a number of stocks in the sector were under pressure.

HSBC lowered its price targets on Next and Home Retail Group, which fell 19p to 2033p and 4.6p to 222.5p respectively, while Marks & Spencer was 5.6p cheaper at 354.1p.

A shortened risers board featured supermarket chain Morrisons, which lifted 1.6p to 291p ahead of half-year results on Thursday.

Elsewhere, shares in online grocery firm Ocado remained under pressure after the recently-listed stock disappointed investors with a smaller than expected rise in third quarter sales.

Shares, which floated at 180p in July and fell to 130p last month, were down 11p at 146p, a drop of 7%, as Clive Black of Shore Capital said he did not expect Ocado to make any "meaningful" profits for at least another five years.

And Connaught shareholders were left fearing the worst today after the social housing firm requested a suspension in trading of its shares and said lenders had refused to provide further cash. Shares have fallen by more than 90% to just over 16p.

The biggest Footsie risers were Invensys up 18.6p to 269.2p, Tullow Oil ahead 46p to 1228p, British Airways up 6.2p to 227p and Severn Trent up 32p to 1365p.

The biggest Footsie fallers were Man Group down 9.7p to 225.7p, Cable & Wireless off 2.7p to 70.1p, Segro down 8.3p to 266.7p and Icap down 12.5p to 419.4p.

16:15

Each quarter the FTSE 100 is reshuffled so it can continue to accurately reflect London's 100 largest stocks, writes Andrew Oxlade. Today is the day that values dictate the constituents for the next quarter.

It's important because some traders claim there's a pattern that stocks that enter tend to underperform - having been over-bought in anticipation of entry - while those that exit can outperform on the anticipation of them bouncing back in. It's just a theory.

The stocks that look most likely to exit the FTSE 100 are Segro, Invensys, Cable & Wireless Worldwide and Home Retail.

The stocks most likely to be promoted are Resolution, Tomkins, Weir Group and SSL International.

11.45

Shares in ProStrakan fall 25.5p to 53p - a two year low - after the pharmaceutical firm suffers a double blow of delays in production for its anti-nausea patch Sancuso and in US approval for its cancer-pain drug Abstral.

Chief Executive Wilson Totten steps down with immediate effect to be replaced by non-executive chairman Peter Allen as acting chief executive.

PiperJaffray analyst Sam Fazeli questions whether the company will need a share issue: 'The delays to Sancusco and Abstral brings the company closer to difficulty in furnishing its debt obligations,' he says.

Shares in TUI Travel shed 2.25.6p to 215.8p after Goldman Sachs cuts its recommendation on the travel firm to 'neutral' from 'buy', saying there is better value elsewhere in the sector.

TUI Travel shares rose sharply recently after the Financial Times Deutschland reported majority shareholder TUI AG was considering buying the shares in the company that it doesn't already own.

'While we do not rule out a takeover of the minority interests in TUI Travel, our analysis suggests that such a bid is unlikely to be imminent,' Goldman Sachs says in a note.

The broker retains its 'buy' rating on Thomas Cook Group - its shares are down 1.3% or 4.4p to 189.6p.

Shares in Micro Focus International rise 18.7p to 335.6p after the IT firm appoints Mike Phillips as CFO, restoring its top management team after CEO Stephen Kelly left a year ago, followed by CFO Nick Bray in June.

Phillips has more than 10 years experience at listed technology corporations, most recently as CEO of Morse, which was acquired earlier this year.

An analyst at Evolution also says it is a good move, as Phillips has a strong reputation in smallcap tech: 'However, we would use share price strength in the short term to sell out - this was a management story and the departures of Kelly and Bray are a major red flag,' he says.

Shares in Genus rise 18.5p to 729.5p after the British animal-genetics firm beats expectations with its full year results and says it continues to see profit growth in the current year.

The company, which sells semen from high-yield strains of pigs and cows to farmers, also says it is in discussions to open a stud facility in India.

'With Genus announcing its entry into the Indian dairy market, and a Russian stud looking likely to follow soon, we believe the outlook for the group looks better than ever,' Panmure Gordon says in a note.

The brokerage maintains its 'buy' rating on the stock.

The FTSE Small Cap index falls 0.3% in opening deals. Cineworld rises 4p to 195p after the cinema chain announces its joint venture screen advertising company, Digital Cinema Media Limited, has entered into a contract with Vue Entertainment Limited for the provision of screen advertising.

Altium Securities says the 'deal provides DCM with a more stable footing.'

10.00

The Footsie fell on the open, with banks were on the back foot after the Wall Street Journal said Europe's recent 'stress tests' of major banks understated some lenders' holdings of potentially risky government debt.

'The (WSJ article) is obviously undermining banks and dragging everything down with it,' David Morrison, market strategist at GFT Global said.

'Last week was an incredible start to September. There were strong moves up on the back of economic numbers out of the States in particular, but... I think there is a growing feeling that as that data is being dissected, it really did not justify the move up that we saw in equities in the big indices.'

Barclays was worst off of the banks as it was hit also by a major leadership shake-up.

The appointment of Barclays Capital boss Bob Diamond as replacement for John Varley as chief executive from March next year came as a surprise to investors and left the stock 8.45p lower at 314.4p, a drop of 2%.

Analysts expressed disappointment at Mr Varley's departure, which the bank announced as speculation also swirled over succession moves at rival HSBC.

The banking upheaval unsettled the London market after a decent run as the FTSE 100 Index slipped 35.8 points to 5403.5.

At HSBC, where Stephen Green is expected to stand down as executive chairman in order to become the Government's new trade minister, shares were 0.6p lower at 662.2p. Other movers in the sector included Royal Bank of Scotland, which fell 0.9p to 46.1p.

Developments in Australia also weighed on the mining sector, with two key independent MPs backing Labor, giving Prime Minister Julia Gillard a majority to form a government.

With Gillard retaining power, a new 30% tax on iron ore and coal mining profits is likely to go ahead.

Rio Tinto was among the biggest fallers in the sector, off 1.6%, with Evolution Securities cutting its rating on the stock to 'neutral' from 'add' as Australian tax uncertainty reappeared.

Cable & Wireless Worldwide fell 0.95p to 56.85p after Citigroup said it is unlikely the firm will be bought by Singapore Telecommunications. The bank said in a note that Southeast Asia's largest telecoms firm wants to focus on the Asia-Pacific region.

Invensys, which is tipped to fall out of the FTSE 100 following this week's reshuffle, added 8p to 258.6p to top the blue-chip risers' list, with traders pointing to newspaper reports that the company is a takeover target.

Tullow Oil rose 22p to 1,204p, as the Financial Times and Daily Mail market reports said the oil exploration company was subject to takeover speculation, with China National Offshore Oil Corporation and ExxonMobil named as potential bidders.

Elsewhere, shares in online grocery firm Ocado remained under pressure after the recently-listed stock disappointed investors with a smaller than expected rise in third quarter sales. Shares, which floated at 180p in July and fell to 130p last month, were down 6.5p at 150.5p, a drop of 4%.

Connaught shareholders were left fearing the worst today after the social housing firm requested a suspension in trading of its shares and said lenders had refused to provide further cash. Shares have fallen by more than 90% to just over 16p.

In a sign that fears of a double-dip recession are receding, British retail sales growth accelerated last month, helped by clothes sales, a survey showed, but discounting played a part in the improvement and consumers remain reluctant to splash out on expensive items.

Emphasising the tough economic environment the corporate sector is facing, however, British companies expect hiring rates to be static for the rest of this year, with firms in the public sector expecting to cut headcount, a survey by recruitment firm Manpower showed.