FTSE stumbles as US banks fail to please
After Wednesday's excitement, investors on both sides of the Atlantic struggled to muster up enough energy to push indices higher on Thursday
In the UK, a number of merger and acquisition stories pulled the blue-chip index in opposing directions: Sainsbury surged amid talk of Qatari stakebuilding; Anglo American and other miners dropped after Xstrata binned its merger proposal just days before a “put up or shut up” clause expired.
Both the FTSE 100 and FTSE 250 indices shed 0.6% to close down 33.2 points at 5,223.0 and 56.2 points lower at 9,485.2, respectively.
Losses on both UK and European indices were exaggerated in afternoon deals as Wall Street slipped at the open as Wednesday’s 2009 index highs proved too much to beat. Exhausted financials investors following Wednesday’s excitement combined with a weaker-than-expected economic report and a first-time net loss for mobile phone giant Nokia. The Philadelphia Fed’s general economic index slipped to 11.5—a tad lower than consensus forecast for a reading of 12.
Among UK equity movements, Sainsbury was the stand-out performer, powering more than 20% higher during the Thursday session amid speculation the Qatar Investment Authority, it’s largest shareholder, had offered 420p-per-share for the supermarkets group—an offer that the Sainsbury family was rumoured to have accepted. Traders expressed surprise at the rumours and highlighted that the company refused a 600p-per-share offer from the Qataris back in 2007, while a press report issued later in the day claimed that such a bid had not been put forward. Still, Sainsbury shares closed up 10.1%.
Fellow supermarkets groups Morrison, Tesco and Marks & Spencer were buoyed by the takeover talk, each adding between 1.2% and 1.8%.
On the downside, miners featured heavily among the fallers as profit-takers moved in following Wednesday’s sector surge and dragged down further by Xstrata dropping its near-£30 billion proposal to merge with Anglo American. This came just five days before Xstrata’s deadline to either make a formal bid or walk away for at least six months.
Anglo America was the FTSE 100’s main casualty, down 4.1%, while Lonmin, Randgold Resources and Xstrata fell back 2.0%-2.5%.
Diversified miner Rio Tinto was also in the news and closed 1.7% lighter after reputedly reversing plans to build an aluminium smelter in South Africa.
Elsewhere, banking stocks were out of favour as US peers’ quarterly earnings failed to excite. HSBC, Standard Chartered, Barclays and Lloyds Banking Group slipped 1.0%-2.1% apiece. The latter had started the session in fine fettle after mid-cap wealth manager Rathbone Brothers announced it is in talks to buy some of the bank’s non-core assets. Read this article to find out why analysts believe such a deal will be earnings accretive.
