The FTSE was knocked back into the red this morning as investors took profits on equities following a five-day winning streak.
The corporate news flow has been relatively heavy for Friday, with part-nationalised bank Lloyds Banking Group in the spotlight after saying it is trying to change the terms of the Government’s Asset Protection Scheme (GAPS). It is even considering other alternatives such as economic improvements and its loan book are faring less badly than originally anticipated.
‘All possibilities remain open and, as part of this process, Lloyds is focused on ensuring that any potential alternatives to GAPS would be in the interest of shareholders and other stakeholders,’ the bank said today.
In the meantime, the Daily Telegraph has reported that Lloyds has been forced to abandon it plans to withdraw from GAPS after failing to raise enough capital to meet the stringent requirements of the Financial Services Authority.
Shares of Lloyds Banking Group were down by 1.5% to 108.05p while Barclays and Royal Bank of Scotland both declined by around 1.2% to 373.8p and 55.7p respectively. Standard Chartered was 1% lower at 1496p and HSBC managed to buck the sector’s negative trend and edge 0.2% higher to 718.8p.
Elsewhere in the financial services sector, insurer Standard Life managed to climb 1.5% to 202.3p after Goldman Sachs raised its recommendation on the company from ‘neutral’ to ‘buy’.In contrast, rival Prudential was 0.6% in the red at 568.5p, Friends Provident lost 0.7% to 83.9p and Aviva fell 1.3% to 411.4p.
Most resource shares were under pressure as well this morning following declines in underlying commodity prices and downgrades.
Platinum producer Lonmin was the worst performing FTSE-100 miner, down 3.1% to 1728p, followed by Antofagasta, Fresnillo and Xstrata, which declined by around 2% to 757p, 778.5p and 955.5p respectively. The price of copper fell in both Shanghai and London today as rising global stockpiles led the market to fear that the metal’s price is looking stretched.
Randgold Resources, which owns gold mines in West Africa, announced today that it expects its average gold-production costs to drop by around 25% by 2012. Its shares were 0.15% higher at 4594p.
Energy major BG Group fell 0.9% to 1136p, BP to declined 0.3% to 554.85p and Cairn Energy dropped 2.9% to 2734p. Tullow Oil was the sector’s worst performer, however, down 3.3% to 1204p on the back of a broker downgrade; Citigroup today cut its recommendation on the oil explorer from ‘buy’ to ‘hold’.
Elsewhere, Cadbury traded marginally higher, up 0.2% to 787p this morning. Analysts at ICAP yesterday said that there’s a 95% chance that Kraft Foods will make a hostile offer for Cadbury.
Real Estate Company British Land was trading 0.9% above its previous close at 515.5p after the Financial Times reported that it is planning to sell its Broadgate office complex to private-equity company Blackstone.
Home improvement retailer Kingfisher was also in demand this morning, up 2.02% to 207.10p as yesterday better-than-expected results prompted a round of price target hikes by brokers.
In small cap news, Coal of Africa was up by nearly 8% to 105.5p after Morgan Stanley initiated coverage on the company with an outperform rating and price target of 150p, leaving a potential upside of 42.2%.
The broker said this is a risky stock, warning that its share price could fall to 36p a share in a bearish scenario, but could rise to 150p and even 380p a share in a bullish scenario.
In the meantime, I am eyeing small-cap under researched resource companies and have placed Victoria Oil & Gas, Dwyka Resources, Hidefield Gold, African Eagle, Uruguay Mineral Exploration, Sunkar Resources, and Central China Goldfields on my watch list.
Separately, official statistics released this morning have revealed that Britain’s public sector net borrowing swelled to record of £16.1 billion in August from £9.9 billion a year. The Office for National Statistics also revealed that the government’s overall debt now stands at £804.8 billion, equivalent to 57.5% of GDP.
By 10.30am (London time) the FTSE 100 had managed to claw back earlier losses, rising 5.96 points (+0.12%) to 5169.91. The broader FTSE 250 was 74.45 points (-0.80%) below its previous close at 9289.63, however. In the meantime, December Dow and S&P 500 futures were trading around 0.3% lower, suggesting the market is currently expecting Wall Street to open in negative territory this afternoon.
