FTSE 100 close: Banks hit by broker doubts
Question marks were raised today over whether the rally in banking stocks - and therefore perhaps the Footsie - can continue.
No eastern promise: Data from Asia has been weak.
In a research note on the banking sector today, Credit Suisse simply doubted the High St banks' capacity to make profits.
Banking analyst Jonathan Pierce warned that new rules on liquidity, other regulatory changes and lower rates will substantially hold back profit growth.
The broker gave RBS and Lloyds Banking Group an underperform rating and cut Barclays to neutral from outperform.
All three banks hovered near the top of the the FTSE 100 loser board, with Lloyds dropping 10.2p to 89.1p, Barclays giving up 18.5p to 268.5p and RBS dipping 2.6p to 43.5p.
The Footsie meandered around its opening level all day and closed 9.96 points down at 4,425.54. On Wall St, the Dow Jones was 8.4 down in early trading, at 8,410.3.
'We needed to pinch ourselves, we had a massive rally in the last two months, but the economy is more like an oil tanker, it takes time to turn around,' said David Buik, senior partner at BGC Partners. 'We were cranked up too much and a 5% fall would be completely logical and understandable, corrections are good and healthy.'
Imperial Tobacco was a big loser, despite an upbeat trading statement. Shares in the Bristol-based tobacco giant fell 65p to 1,567p despite a 49% rise in adjusted operating profits to £1.37bn. Imperial also hailed the success of its £10bn acquisition of Gauloises maker Altadis.
It reported that revenues were boosted 54% to £12.4bn by the takeover of the Spanish firm, which only contributed to two months of last year's interims.
Encouraging trading figures from InterContinental Hotels helped power the Holiday Inn chain to the top of the blue-chip risers board today.
Shares in the company were up 16.5p to 675p - after it revealed a stabilisation in occupancy rates and said average revenues per available room - the key industry measure - were above the industry norm.
Vodafone was another strong riser, up 3.85p to 123.5p after announcing an initiative allowing content partners and developers to create a range of mobile internet services that can be rolled out to all Vodafone customers.
International Power benefited from a trading statement that contained no bad news. It forecast profit for 2009 to fall, but in line with its previous estimates.
The power generating group, which has interests in more than 45 power stations around the world, said its financial position remained strong and it expected cash flow to remain strong. Shares rose 11.5p to 276p.
Shares in Serco rose 13.5p to 394p after the support services firm said it had made a strong start to the year. It has signed £1bn worth of contracts, putting it on track to deliver on expectations for 2009.
But analysts cautioned that the company would need to do more to justify its current share price and cement a sustained rally.
'While Serco has very good revenue and earnings visibility our stock preference remains elsewhere in the sector, so we maintain our cautious stance,' analysts at Panmure Gordon & Co wrote in a note to clients.
Outside the Footsie, Enterprise Inns was one of the main losers, after scrapping its dividend.
Shares in the UK's second-biggest pubs group were nearly 9%, or 13p down to 160p, after it reported a £29m drop in profits for the six months to 31 March to £103m. Enterprise said the £30m divi payout would be switched to paying off its £3.8bn debt pile.
The group is also engaged in a war of words with campaigners calling for reform of the beer tie, under which licensees are obliged to buy products from one pub company.
Enterprise has an estate of 7,616 leased and tenanted pubs, from which lobby groups such as Fair Pint have drawn considerable support with their argument that the tie has made pubs uncompetitive at a time of gruelling trading conditions.
Enterprise insists that the majority of its sites are trading profitably. MPs on the Business and Enterprise committee are due to publish a report on the matter tomorrow.
Premier Foods was another big FTSE 250 loser, 2p down at 36.5p, despite the successful relaunch of its Hovis brand, which the group said today had helped it steal a 25.7% share of the sliced bread market.
The Oxo-to-Branston company reported sales ahead 3% in the 16 weeks to 25 April.
Shares in Stobart Group surged 10%, or 9.75p to 107p, after it reported a sharp rise in full-year profits and said it had not been as badly affected by the economic downturn as some of its rivals. It has reported a shift to cheaper, own-label brands, but this has not affected volumes.
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