FTSE close: HSBC, Lloyds, AB Foods down; Essar up

By Adrian Lowery
Updated: 12:26 EDT, 28 February 2011

17.15 (close)

The banking sector dragged on the London market today after HSBC posted annual results which fell below market expectations.

HSBC's profits of $19bn (£11.8bn) for 2010 were more than double a year earlier, but the figure was slightly short of City expectations.

The FTSE 100 Index closed 7 points lower at 5994, as Associated British Foods revealed a deterioration in sales growth at its discount fashion chain Primark.

The market did dip back into the black earlier in the session as oil prices stabilised despite the ongoing turmoil in Libya.

The pound was up against the dollar at 1.62 after mixed economic data in the US weakened the greenback. Sterling was also up against the euro at 1.17.

HSBC shares were down 5% - or 33.1p to 678p - after it warned that a core target of its profitability will be cut due to the cost of tougher banking regulations.

Royal Bank of Scotland also dropped 0.4p to 45.2p, while Lloyds Banking Group was still under pressure following Friday's results warning about the UK economic outlook, with shares 0.8p lower at 61.96p.

AB Foods slipped 6%, or 60.5p to 966.5p, as it revealed Primark had seen a "noticeable" slowdown in UK consumer demand.

While half-year figures will be in line with market expectations, Shore Capital said there was more evidence that the company's various divisions were experiencing either lower sales growth or margin pressure.

Next was also impacted by the Primark update as its shares fell 48p to 1976p.

Penguin, Financial Times and textbook publisher Pearson moved in the opposite direction, lifting 9p to 1050p, after reporting a 15% rise in full-year profits to £857m and a 9% increase in its dividend.

Results from fellow publisher Bloomsbury also made pleasant reading for investors as it forecast that 2011 will be the year of the e-book following strong demand for devices such as Kindle and iPad.

E-book sales are currently running at just under 10% of print sales and this is expected to increase, the small cap stock said as it posted a 4% rise in revenues and an improvement in underlying profits. Shares were up 2.3p to 118.3p, 2%.

FTSE 250 recruitment firm Hays was another firm to see its shares rise in the wake of full-year results.

Investec Securities upgraded the stock from hold to buy and said Hays had strong recovery prospects over the next two to three years, particularly due to its prospects in the Asia Pacific region. Shares were 4.8p higher at 124.8p, a gain of 4%.

The biggest Footsie risers were Essar Energy up 17.4p at 517p, Hammerson ahead 14.3p at 466.1p, British Land up 14.5p at 583.5p and GKN ahead 5.2p at 209.9p.

The biggest Footsie fallers were Associated British Foods down 60.5p at 955.5p, HSBC off 33.1p at 678p, Next down 48p at 1976p and Morrisons off 6p at 276.8p.

16.00: The Footsie, which slumped 20 points in the morning session, fought back in the afternoon to push ahead nearly 9 points to 6009.4, after it was supported by a buoyant US market.

The Dow Jones was up by 0.7% to 12,212 points after data revealed a bigger than expected surge in household income and as oil prices stabilised despite the ongoing turmoil in Libya.

HSBC shares were down 39.8p to 671.2p, and Royal Bank of Scotland also dropped 0.1p to 45.5p.

12.15

The FTSE 100 is down 20.3 points down to 5,980.9.

'The Middle East situation has reminded investors of the risks that remain in the developing world,' Colin Lunnon, fund manager at Octopus Investments, said.

'We have been content to direct recent new money inflows to cash for the time being until a clearer picture presents itself and some tangible trends begin to emerge.'

Meanwhile, retail stocks were on the back foot after Primark Owner AB Foods disappointed with figures earlier.

Next was 47p down at 1,977p and Wm Morrison was 5.6p down at 277.2p.

'With more gloomy news from Primark today on High Street trading, we remain cautious in the short term about the general retail sector,' Nick Bubb, analyst at Arden Partners said.

Penguin, Financial Times and textbook publisher Pearson moved in the opposite direction, lifting 16p to 1057p, after reporting a 15% rise in full-year profits to £857m and a 9% increase in its dividend.

Results from fellow publisher Bloomsbury also made pleasant reading for investors as it forecast that 2011 will be the year of the e-book following strong demand for devices such as Kindle and iPad.

E-book sales are currently running at just under 10% of print sales and this is expected to increase, the group said as it posted a 4% rise in revenues and an improvement in underlying profits.

Recruitment firm Hays was another firm to see its shares rise in the wake of full-year results.

Investec Securities upgraded the stock from hold to buy and said Hays had strong recovery prospects over the next two to three years, particularly due to its prospects in the Asia Pacific region.

Shares were 2.8p higher at 122.8p, a gain of 2%.

10.00

HSBC led bank shares lower today as traders were underwhelmed by its results.

The London market drifted into negative territory again, with the FTSE 100 index 30.4 points down to 5,970.8 as unrest in Libya added to the downbeat mood on the markets.

'There's been a slight bit of initial disappointment around the HSBC numbers, which although they were a vast improvement on 2010, are slightly shy of expectations,' Richard Hunter, head of UK equities at Hargreaves Lansdown, said.

'Of course (there are) concerns around Libya ... of further contagion throughout the region.'

HSBC shares came under pressure today despite the banking giant's return to profitability.

The group's surplus of $19bn (£11.8bn) during 2010 was more than double a year earlier but came in slightly short of City expectations and meant shares slipped 3% or 21.4p to 689.7p.

Lloyds Banking Group continued to suffer from its results on Friday, shedding 0.75p to 62.1p, after UBS removed the company from its European Key Call list and downgraded pretax profit estimates.

However, the broker said that despite the reduction in earnings, in its view the long-term investment case for Lloyds was intact.

There was also disappointment for Primark owner Associated British Foods, which slipped 39.75p to 987.25p as it revealed a deterioration in sales growth at Primark and said the discount fashion chain had seen a 'noticeable' slowdown in UK consumer demand.

While half-year figures will be in line with market expectations, Shore Capital said there was more evidence that the company's various divisions were experiencing either lower sales growth or margin pressure.

Among gainers, bullish broker sentiment helped Essar Energy , up 16.4p to 516, with Credit Suisse initiating coverage of the Indian-focused oil and gas business with an 'overweight' rating.

The broker said Essar had a strong growth outlook, offering investors an attractive play on the Indian power market.