FTSE Close: Barclays down; Lloyds, Icap up

By Adrian Lowery
Updated: 12:17 EDT, 10 September 2010

17.10 (close)

The FTSE 100 Index broke the 5500 barrier for the first time in four months today as investors clung to hopes of a recovery in the US economy.

Thursday's better-than-expected jobs and trade data was followed today by a 1.3% rise in US wholesale inventories - much higher than the 0.4% predicted improvement and a sign that firms expect retail sales will pick up.

This settled the nerves of investors, with the FTSE 100 Index building on its recent gains to close 7.5 points higher at 5501.6. There was little movement in the pound, which was slightly lower against the dollar and euro.

The decent session for London shares was achieved despite uncertainty for banks ahead of rules due to be finalised this weekend that will require firms to hold capital reserves of at least 7%.

While most banks' capital ratios are well above that, it represents a marked increase on the capital requirements seen before the financial crisis.

The sector has endured a testing week after high-profile leadership changes at Barclays and HSBC and amid reports that recent stress tests into 91 EU banks were not rigorous enough.

Barclays fell 4.25p to 319.1p but Lloyds Banking Group gained for a second straight session, after a note from UBS on Thursday argued that it looked "overcapitalised" following its £13.5bn rights issue and as loan losses inherited from HBOS came under control.

Lloyds shares rose another 0.9p to 75.6p, while fellow part-nationalised firm Royal Bank of Scotland lifted 0.4p to 48.5p.

Tullow Oil was the biggest top-flight faller as hopes of a takeover approach for the exploration firm started to fade, leaving it 29p lower at 1234p.

In a quiet session for corporate news, shares in construction firm Morgan Sindall jumped 7% after it struck a £28m deal to buy the bulk of the social housing contracts operated by collapsed firm Connaught.

Morgan's Staffordshire-based Lovell subsidiary said the newly-acquired contracts would generate around £200m in additional annual revenues. Shares were 47p higher at 708.5p.

Meanwhile, JD Wetherspoon shares fell despite a 7% rise in the pub chain's annual profits and amid signs of a good start to its new financial year.

Like-for-like sales were 1.5% higher in the six weeks to September 5, but this failed to satisfy investors as shares declined 5% or 21p to 422.5p.

Property website Rightmove moved in the opposite direction as investors considered the implications of German publisher Axel Springer's bid for French property website company SeLoger.com.

With analysts pondering the chances of a similar move for the UK's biggest player, Rightmove shares edged 5% higher or 32.5p to 740p.

The biggest Footsie risers were Icap up 16.9p at 454.5p, Aviva ahead 12.8p at 409.3p, TUI Travel up 7p at 229p and 3i Group ahead 7p at 279p.

The biggest fallers were Tullow Oil down 29p at 1234p, Cairn Energy off 10p at 434.9p, Eurasian Natural Resources down 14.5p at 839.5p and Home Retail Group off 3.4p at 211.8p.

15.15

Thursday's better-than-expected jobs and trade data eased fears among Wall Street traders: the Dow Jones Industrial Average opened 0.2% higher, while the Standard & Poor's 500 Index rose 0.4%.

That pulled the FTSE 100 out of negative territory, by 7 points to a new four-month high at 5500.

Hopes that the world's largest economy has fully escaped the recession were boosted by a report today that showed wholesale inventories and sales rose by 1.3% in July - much higher than the 0.4% predicted rise.

12.25

JD Wetherspoon shares fall 18.8p to 424.7p despite a 7% rise in the pub chain's annual profits and signs of a good start to its new financial year.

Like-for-like sales were 1.5% higher in the six weeks to September 5, but this failed to satisfy investors.

Property website Rightmove moves in the opposite direction as investors consider the implications of German publisher Axel Springer's bid for French property website company SeLoger.com.

With analysts pondering the chances of a similar move for the UK's biggest player, Rightmove shares surge 50p to 757.5p, to leave it clear at the top of the FTSE 250 risers board.

12.00

On the downside, Arden Partners slides more than 24%, or 14p to 43.5p, after the stockbroker said it is likely to disappoint investors when it publishes full-year results. It blamed tough equity trading conditions and the cost of laying people off.

10.40

Shares in New York are expected to open up, according to spread betting broker BGC.

Its punters are pencilling in a rise of 8 points to 10,412 for the Dow and for the S&P 500 to begin 2.25 points higher at 1,104.75. The Nasdaq tech index is forecast to rise 4.25 points to 1890.

10.00

Encouraging signs from the US economy helped settle investors' nerves, but the Footsie still fell back after the open.

With better-than-expected jobs and trade data easing fears that the world's largest economy might slip back into recession, Asian markets finished in positive territory, but the FTSE 100 index last stood 7.4 points down at 5,486.8.

'The bulls and bears have knocked each other senseless and are lying in the corner. The bulls are waiting for employment growth and the bears are waiting for European problems to blow up,' said John Haynes, head of research at Rensburg Sheppards.

There was also encouragement from the Japanese economy as figures showed the country grew by more than expected. The Nikkei finished 1.5% higher and the Hang Seng lifted 0.5%.

But heavyweight oil groups and miners dragged the London index lower, with BG Group a big loser, off 14p to 1,080.5p, and Cairn Energy down 5.4p to 439.5p.

Banks rose for a second straight session after a note from UBS yesterday argued that Lloyds Banking Group looked 'overcapitalised' following its £13.5bn rights issue and as loan losses inherited from HBOS came under control.

Regulators meet this weekend to hammer out final rules for lenders' capital buffers, with talk of a 7% core Tier 1 ratio in the market. David Buik, analyst at BGC Capital Partners, said in a note that British banks seemed to be in that position already.

Lloyds shares rose another 0.8p to 75.5p, while fellow part-nationalised firm Royal Bank of Scotland lifted 0.8p to 48.9p.

In a quiet session for corporate news, shares in construction firm Morgan Sindall jumped 8% after it struck a £28m deal to buy the bulk of the social housing contracts operated by collapsed firm Connaught.

Morgan's Staffordshire-based Lovell subsidiary said the newly-acquired contracts would generate around £200m in additional annual revenues. Shares jumped 53p to 714.5p.

3i Group was also a strong gainer, up 4.2p to 276.2p, after a Financial Times report it was gearing up to exit its holding in Dutch pump-maker Hyva, valued at around €500m for a large profit.