Stock market report: Friday close
Lloyds Banking Group lost almost a third of its stock-market value today after turning over a stone and finding losses totalling £11 bn at recently acquired HBOS.
Updates: Latest from the stock exchange
The shock news sparked another sell-off of the banking sector, and sent investors scurrying for the exit. Lloyds slumped 29.5p to 61.4p after briefly touching a record low of 54.9p. More than 135m shares changed hands as £4bn was wiped from the bank's £14.85bn value.
Other banks slammed into reverse as the prospect of full-scale nationalisation of the UK's banking system drew nearer. Royal Bank of Scotland lost 2.2p at 21.8p, Barclays 4½p at 100½p, and Standard Chartered 25½p at 790½p.
The Queen's broker JPMorgan Cazenove has warned that HSBC will have to halve its dividend and turn to the City for extra funds if it wants to prosper once the global economy emerges the other side of the recession. The broker has repeated its underperform rating on HSBC, down 3½p at 530p.
The blue-blooded broker says HSBC has sufficient capital to weather the storm of a severe economic downturn, but should still raise capital early in the economic cycle to address the City's concerns about its prospects.
It adds that this should take the shape of a HSBC was the first bank to alert the City to the subprime mortgage meltdown in February 2007, when it wrote off hundreds of millions of pounds in the value of toxic loans relating to one of its Us subsidiaries. It has so far resisted the urge to turn to shareholders or the Government for extra funding.
Talk that Legal & General will soon hit the rights-issue trail refuses to go away. The shares were among the biggest fallers in the FTSE 100, losing 5.2p at 49.5p. City speculators say there is no smoke without fire.
The rest of the market traded below its best levels of the day following those shock losses at HBOS and opening falls on Wall street this afternoon. The FTSE 100 index fell 21.2 to 4181.0 in thin trading, while in New York the Dow was down 4.14 at 7928.62.
Rio Tinto steadied itself with a rise of 50p to 1989p as brokers continued to ponder its raising of $19.5bn (£13.5bn) via a cash injection by its biggest shareholder Aluminium Corporation of China (Chinalco).
Citigroup has jacked up its target from 1850p to 2530p while deutsche bank has moved from 2515p to 2627p and Bernstein has raised its sights from 2000p to 2400p.
Centrica firmed 4¼p to 285¾p after further speculation it may soon become a bid target for Russia's Gazprom. deputy chairman Andrey Kruglov said the company may take advantage of the current financial turmoil to pick up assets on the cheap.
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The appointment of Frenchman Xavier Rolet as chief executive of the London Stock Exchange may be unlikely to stop the embarrassing relegation of its shares from the FTSE 100 index.
They have slumped from 1977p during the past year and appear odds-on to get the boot in next month's quarterly review. LSE shares clawed back yesterday's losses with a rise of 16p to 486p.
Falling beer sales, cheaper booze competition from the supermarket and the worsening recession have left pub chain operators with huge hangovers. KBC Peel Hunt reckons debt reduction is the single biggest issue, and adds: 'While all overborrowed going into the recession, these companies are strongly cash-productive and downsizing debt is currently the best route to transforming the equity.'
Mitchells and Butlers, 4p firmer at 218½p, is rated a buy and JD Wetherspoon, 4p better at 391¼p, which has been upgraded to a buy, are best placed to benefit from reducing debt.
The broker recommends a switch from Greene King, 22½p down at 421p and rated a sell, into Marston's, 1½p higher at 120p and given a hold rating. Punch, ¾p cheaper at 40¾p, remains a sell while Enterprise Inns, 2p better at 57p, is on hold.
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