UK shares end flat as investors await stress tests
The FTSE 100's Thursday performance appeared lacklustre on the surface but the flat finish belied heavy volumes in volatile trade ahead of the US stress test results
The blue-chip index ended Thursday’s session 2.2 points firmer at 4,398.7, a gain of just 0.1% that belied the unusually high volume of trades, while the FTSE 250 index, which is oft seen as a truer reflection of the wider UK economy, fell back 86.9 points or 1.1% to 7,784.3.
Barclays’ finance director said earlier today that the bank’s impairment charges and provisions could rise by 50% this year after a 79% surge in the first quarter to £2.3 billion, as the economy continues to feel the pressure, while Lloyds’ finance director said corporate bad loans could jump 50% to £15 billion in 2009.
Lloyds shares led the losers by the Thursday close, slumping 14.3% to 97p, followed by Royal Bank of Scotland, down 9.0% at 41.6p, and Barclays, off 4.3% at 275.75p.
Banks were also under the cosh ahead of this evening’s results from the US government on the capital requirements of 19 large, American banks. Leaked reports have named Citigroup and Bank of America as featuring on the list of those in need of more cash, while the exclusion of smaller banks from the testing programme has raised fears that these too may need to raise further capital.
The stress test news comes on the same day that both the UK and European central banks announced their latest interest rate decisions. The Bank of England kept its base rate at 0.5%, as widely expected, but issued a surprise announcement to the tune that it is hiking its asset purchase scheme by an additional £50 billion on top of the initial £75 billion. The increase itself was not entirely unexpected, but the timing of the move was in that most economists had predicted an announcement either later in the month or at the next rate decision meeting.
The ECB fulfilled analyst forecasts by cutting its main interest rate to 1% from 1.25% and announced it will launch its own quantitative easing programme in June.
Returning to equity movements, heavyweight Vodafone was out of favour, its 4.9% to 121.25p helping drag the FTSE 100 index lower in afternoon deals as the mobile telecoms group tracked the sector’s decline in the US on the back of analyst downgrades.
On the upside, Legal & General was the top performer, gaining 9.9% to close at 71.9p, thanks to quarterly numbers from French peer AXA that weren’t as bad as many had feared. Other insurers also received a fillip from the news, with Prudential up 3.7% at 441.75p and Aviva ahead by 0.7% at 341p. South Africa-based firm Old Mutual compounded Axa’s positive news with its own reassuring Financial Groups Directive (FGD) surplus figures. London-listed Old Mutual shares rallied 4.3% to 70p.
Other leading shares included consumer goods giant Unilever, which added 9.8% to 1,443p after reporting a near-5.0% increase in first quarter underlying sales; mining firms Kazakhmys and Rio Tinto, which took on a respective 8.0% to 716.5p and 2.0% to 3,019p as metals prices gained momentum; and oil & gas producers BP, BG Group, Royal Dutch Shell, which each climbed 0.2%-2.0% higher, fuelled by rising oil prices.
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