Unemployment puts an end to FTSE gains
A surge in jobless figures hit the UK markets Wednesday, although many financials managed to hold on to gains
The FTSE 100 index closed down 1.4% or 52.1 points at 3,805.0, while the FTSE 250 index slipped 0.3% or 20.1 points to 6,191.7.
It may come as something of a surprise, however, that a number of banking stocks and several other financials were among the top gainers. Barclays ended Wednesday’s session in pole position, 5.2% ahead at 96p, and Royal Bank of Scotland was not far behind with a gain of 4.1% to 219.5p. Insurer Legal & General added 5.1% to 31.2p and private equity firm 3i Group ticked up 4.0% to 219.5p.
Cautious optimism surrounding the financial sector was buoyed today by upbeat comments from the RBS chairman, adding the bank to the list of those that have made similar statements over the past week. HSBC missed out on the sector’s sanguinity as the stock traded ex dividend, sending it 5.1% lower to 436.75p.
Carnival was another solid performer, up 2.2% to 1,590p ahead of its first quarter results on Friday. Morningstar analyst Warren Miller expects that the cruise liner’s dominant position in the industry will enable it to weather the short-term storm and return to profitability in the coming recovery.
Elsewhere, it was a much less rosy picture. Miners were once again the main weight on the blue-chip index, with Rio Tinto leading the way as speculation gathered pace that the Australian government might move to reject the group’s US$19.5 billion deal with Chinalco, leaving Rio with little choice but to launch a discounted rights issue to reduced its debt. The sector was also under pressure amid fears Madagascar’s new president, who was today appointed by the island’s military after a successful coup, will make life more difficult for multinationals investing in the country’s oil and mining industry.
Rio Tinto was the main casualty in the FTSE 100, dropping 6.8% to 1,848p, while Randgold Resources lost 5.4% to 3,000p and Vedanta Resources fell back 4.2% to 567.5p.
On the economic front, the ILO measure of UK unemployment surged above the 2 million mark for the first time since 1997, taking the jobless rate up to 6.5%. Sterling reacted to the news by diving to an eight-week low against the euro, while the release of the minutes to the Bank of England’s latest rate setting meeting, at which it cut interest rates to a new record low of 0.5%, revealed the twelve committee members were unanimous in their decision to start quantitative easing.
Across the Atlantic, Wall Street cautiously awaited news from the Federal Reserve on its asset buying scheme, although hopes the US government will launch its own quantitative easing programme were diminishing late Wednesday after some reassuring US data quelled fears over possible deflation.
