FTSE close: Centrica down, miners up

By Ed Monk for Thisismoney.co.uk
Updated: 12:20 EDT, 9 May 2011

17.15 (close)

A fresh downgrade to Greece's credit rating and a hefty compensation bill for the banking industry troubled traders today as the London market closed in the red.

The FTSE 100 Index was 34 points lower at 5942.69 after Standard & Poor's slashed Greece's rating further into junk status, amid expectations that European officials will revamp the country's bail-out package.

The move triggered falls for the euro, which was down against the pound at 1.14, but sterling fell against the US dollar at 1.63.

S&P's decision triggered further declines in the banking sector, which was already under pressure from a decision by the British Bankers' Association to abandon a legal battle over the mis-selling of payment protection insurance (PPI).

HSBC, which has put aside 440m US dollars (£269m) to cover claims, saw shares fall 3.5p to 648.2p as it also revealed lower than expected profits in its first quarter trading update.

Royal Bank of Scotland, which is yet to reveal the expected financial hit from PPI repayments, was down more than 2% or 1p at 41.7p. Barclays which expects claims to cost £1bn, was off 3.7p at 273.9p.

Miners and energy firms featured strongly on the risers board after last Friday's better-than-expected US unemployment figures boosted prospects for global demand.

A slump in commodity prices last week - triggered by a raft of negative economic data - shocked the markets and raised fears of a slowdown in the global recovery.

But crude oil prices were on the up again today, with Brent crude 3% higher at 113.2 US dollars a barrel. Metal prices, such as gold and silver, were also higher.

Miners Kazakhmys and Lonmin advanced 8p to 1283p and 13p to 1562p respectively, while oil and gas giant Petrofac gained 12p to 1471p.

Centrica posted the biggest fall on the blue chip index after the British Gas owner said earnings will grow at a more modest rate than expected.

The company blamed the disappointment on higher taxation on its upstream profits and a squeeze on margins in its household supply business caused by rising wholesale gas costs. Centrica shares dropped 12p to 303.5p.

Shares in Thomson owner TUI Travel were down 2% after rival Thomas Cook forecast a fall in its full-year operating profits.

TUI, which is due to update the market on Tuesday, fell 1.2p to 243.6p, while FTSE 250 rival Thomas Cook saw a drop of 4.9p to 165.7p after warning it will take a further £35m hit due to the uprisings in the Middle East.

Rank Group was high on the FTSE 250 Index risers board - up 2.8p to 151.6p - after a Malaysian investment fund increased its stake in the Mecca bingo firm to 40%, triggering a mandatory offer for the rest of the company's shares.

The biggest Footsie risers were Inmarsat up 26p at 619p, Autonomy ahead 63p at 1675p, IMI up 23p at 1081p and Sage Group ahead 4.6p at 285.8p.

The biggest Footsie fallers were Centrica down 12p at 303.5p, Royal Bank of Scotland off 1p at 41.7p, IAG Group down 5.7p at 248.4p and ITV off 1.6p at 74p.

15.15: Over on Wall Street, the Dow Jones has opened higher, rising 23.91 points to 12,662.65.

Meanwhile the Footsie continues to labour, bumping along 29.35 points off at 5937.42.

13.50:

At lunchtime the FTSE 100 is being held down by banks, which have suffered losses after it was confirmed they will not fight rules forcing them to repay thousands of customers over mis-sold PPI.

Banks filled the fallers' board after the British Bankers' Association (BBA) decided not to appeal against a HigH Court ruling.

Royal Bank of Scotland, which is yet to reveal the expected financial hit from PPI repayments, is down more than 2% or 0.9p at 41.8p.

HSBC, which has put aside £269m, was down 10.1p at 641.6p, Barclays which expects claims to cost £1bn, is off 3.6p at 274.1p and Lloyds Banking Group, which has made a provision of £3.2bn, lost 0.5p to 53.5p.

That has helped to push the FTSE 100 50.19 points lower to 5926.58.

12.20:

HSBC is the latest bank to report, and the latest bank to reveal the expected hit from mis-sold payment protection insurance policies.

HSBC has earmarked £269m to cover payment protection insurance compensation - a cost that contributed to a 14% fall in the banking giant's first quarter profits.

HSBC's provision is much lower than the £3.2bn set side by Lloyds last week and the £1bn announced by Barclays.

Shares in HSBC were down 11.2p at 640.5p, as traders digested today's results. Here's more detail.

Overall today, the FTSE 100 is down 30.24 points at 5946.53.

11.00:

We have more on Centrica's update, which has sparked fears that higher gas and electricity prices could be on the way.

A spokesman for the British Gas owner said it had yet to take a decision about whether to increase tariffs.

Shares in Centrica are down 11.5p at 304p.

The FTSE 100 has extended losses to trade 30.8 points lower at 5,946.

Joshua Raymond, market strategist at spreadbetter City Index, commented: 'Trading has started on the back foot once again with focus on sovereign debt continuing to instil a bit of pessimism in the markets.

'The market is looking towards the eurozone, and Greece in particular, given the murmurs emanating about the potential need for a second bailout or even an exit from the euro.'

He added that following last week's 'mini commodities crash' there had been a bit of a bounce back with both copper and crude oil prices making gains.

10.25:

The FTSE 100 struggled after falls at Centrica on warnings of lower profits, while travel firms dipped and miners clawed back losses from last week.

The Footsie rose first thing this morning but has drifted and is currently 16.7 points lower at 5960.08.

Centrica posted the biggest fall in the FTSE 100 Index today after the British Gas owner said earnings will grow at a more modest rate than expected.

The company blamed the disappointment on higher taxation on its upstream profits and a squeeze on margins in its household supply business caused by rising wholesale gas costs.

Centrica shares dropped 10.85p to 304.6p but the wider London market showed signs of stabilising after last week's volatility, with the FTSE 100 Index ahead 13.5 points at 5990.5.

Miners dominated the risers board after last Friday's better-than-expected US unemployment figures boosted prospects for global demand. Strong performers included Rio Tinto, which improved 71.25p to 4222.25p.

As well as Centrica's 3% decline, shares in Thomson owner TUI Travel were down 2% after rival Thomas Cook forecast a fall in full-year operating profits.

TUI, which is due to update the market on Tuesday, fell 3.6p to 241.3p, while FTSE 250 rival Thomas Cook posted a drop of 3.2p to 167.4p after warning it will take a further £35m hit due to the uprisings in the Middle East.

Eyes were on the banks after their trade association, the British Bankers' Association, confirmed it would not pursue an appeal against a ruling forcing them the contact customers to offer compensation for mis-sold payment protection insurance.

The ruling could cost the industry as much as £8bn.

Barclays has joined Lloyds in confirming that it has set aside a fund to settle claims. Barclays has earmarked £1bn. But the news had little impact on the banks' share prices this morning. Barclays was 1p down to 276.6p, while Lloyds was 0.05p up at 54.05p.

Rank Group topped the FTSE 250 Index risers board - up 9p to 157.8p - after a Malaysian investment fund increased its stake in the Mecca bingo firm to 40%, triggering a mandatory offer for the rest of the company's shares.