FTSE close: Lloyds, Shroders down; Carnival up

By Ed Monk for Thisismoney.co.uk
Updated: 12:19 EDT, 5 May 2011

17.10 (close)

The London market continued its grim week today after worse than expected results from Lloyds Banking Group sparked losses for financial stocks.

The FTSE 100 Index closed down 64.1 points at 5920 after the part-nationalised bank shocked analysts by setting aside up to £3.2bn to pay compensation to customers mis-sold payment protection insurance.

Lloyds, which dropped 4.6p to 53.4p and was among the top flight's biggest fallers, sent ripples through the rest of the heavily weighted banking sector.

Wall Street's Dow Jones Industrial Average was also down, dropping 0.4% after the US government reported an unexpected jump in unemployment claims.

The US Labor Department compounded low sentiment when it said first-time claims for unemployment benefits rose to 474,000 last week, the highest level in eight months. Economists had expected claims would drop to 410,000.

Despite the weak economic data from the US, the pound fell to 1.64 against the dollar but it was up to 1.24 against the euro.

A recent fall in commodity prices, particularly in silver, ensured mining stocks remained under pressure. Fallers in London included Xstrata after a drop of 38p to 1410p, while Fresnillo saw a decline of 70p to 1445p.

But the main focus was on the banking sector after Lloyds reported that its decision not to contest a recent High Court ruling would cost it more than the £1.5bn estimated by the City. The provision dragged the bank into the red for the first quarter, while it also saw an increase in bad debt losses.

Royal Bank of Scotland, which is due to post a trading update on Friday, fell 1.2p to 40.5p, while Barclays was off 7.5p to 276.3p as analysts speculated on how the Lloyds' guidance would impact on other leading industry players.

Schroders topped the fallers board after the fund manager's first quarter results highlighted the impact of market volatility on retail investor demand. Shares were 172p lower at 1700p, a drop of 9%.

Elsewhere, shares in Morrisons were up after the supermarket chain posted stronger-than-expected like-for-like sales growth of 2.5% for the 13 weeks to May 1 after being boosted by the later Easter and the royal wedding.

Shares increased 3p to 303.3p even though the firm said the current squeeze on disposable incomes meant it remained cautious about prospects going forward.

Outside the top tier, Southern trains provider Go-Ahead said sky-high fuel prices were encouraging more motorists to ditch their cars and use public transport. Buoyed by strong revenues growth, it said operating profits for the year to July were now likely to be ahead of current expectations. Shares were down 1p to 1400p.

The biggest Footsie risers were Carnival up 102p at 2550p, Smith & Nephew ahead 20p at 680p, International Consolidated Airlines up 6.6p at 246p, and Arm Holdings ahead 9p at 567p.

The biggest Footsie fallers were Shroders down 172p at 1700p, Lloyds Banking Group, off 123p at 1398p, Essar Energy down 4.6p at 53.4p, and Fresnillo off 70p at 1445p.

15.40: Drama at no-frill airline Flybe where shares have plummeted 24% after it warned leisure bookings in Feburary and March were hit by hard-pressed consumers cutting back on non-essential travel.

Bookings for holidays or visiting family and friends were impacted by the slowdown in discretionary consumer spending although business travel – representing 45% of passengers - was 'very resilient', according to the carrier.

Here's more.

The FTSE 100 is now 51.42 points lower at 5932.65.

14.30:

Over on Wall Street the Dow Jones has fallen 74.63 points on opening. It is now at 12,648.95.

Meanwhile, the FTSE 100 has slumped 64.46 points to 5919.61.

Lloyds has taken a hammering - now a dizzying 9.24% down (5.354p lower at 52.68p) after it revealed a potential £3.2bn hit from the repayment of payment protection insurance claims.

There is also trading news from National Express today. The transport company said group revenues were up 5% in the period, and stressed that its hunt for new board members was 'progressing well'.

NatEx is fighting to fend off criticism from a rebel shareholder, Elliott Advisors, which is pressing for the election of three of its own new non-executive directors.

Shares in National Express were up 2.5p at 260.5p. Here's more.

13.30:

Here's more on the decision to keep interest rates on hold at 0.5%.

It seems fears of faltering growth outweighed fears of sprialing inflation and MPC members gave borrowers a reprieve once again.

There is also news today of the rescue of struggling fashion chain AllSaints.

Lion Capital, owner of La Senza and American Apparel, teamed up with US investor Goode Partners to snap up the clothing retailer for an undisclosed sum.

Meanwhile, the FTSE 100 continues to labour, 44.46 points off at 5939.61.

12.05:

The Bank of England has kept rates on hold for another month as trepidation about the fragile economy again trumps inflation fears.

We have more on Morrisons, which beat City expectations with a 2.5% increase in like-for-like sales in the quarter to May 1.

The shares have edged up 1.6p to 301.9p.

The FTSE 100 is trading 51.5 points lower at 5,932.6.

Futures trading points to a lower open on the Dow Jones later, with US investors awaiting retail data and results from General Motors.

10.20:

The FTSE 100 has lurched in and out of positive territory with commodity stocks recovering to offset a blow for Lloyds Banking Group, while traders awaited a rates decision.

A shock warning from Lloyds Banking Group over the cost of insurance mis-selling claims knocked banks.

Lloyds shares slumped nearly 6% - down 3.2p to 54.8p - after the part-nationalised bank set aside a bigger-than-expected £3.2bn to deal with potential claims relating to payment protection insurance.

Royal Bank of Scotland, which is due to report first quarter figures tomorrow, fell 1.1p to 40.6p.

Overall, the FTSE 100 settled 4.17 points lower at 5979.9, with losses pared as miners made a modest recovery having suffered yesterday on the back of lower commodity prices.

Eyes will be on the Bank of England later when the Monetary Policy Committee announces its latest interest rate decision. No change is expcted.

Check back later for the decision and reaction.

Lloyds was joined on the fallers board by Schroders after the fund manager's first quarter results highlighted the impact of market volatility on retail investor demand. Shares were 106.5p lower at 1765.5p, a drop of 6%.

Elsewhere, shares in Morrisons were slightly lower after the supermarket chain posted stronger-than-expected like-for-like sales growth of 2.5% for the 13 weeks to May 1.

Analysts noted that with inflation running at around 3% in-store, volumes were flat to slightly negative in an increasingly tough environment for supermarket retailers. Shares fell 0.6p to 299.7p.

Go-Ahead provided the biggest jump outside the top flight, after the Southern trains firm said operating profits were running ahead of expectations. Shares rose 6% or 91p to 1491p.