Sharp falls in the banking sector depressed the FTSE 100, down 151.7 points at 3678.34 at around 11:20 am, to its lowest level since late October, when it touched an intra-day low of 3665.21.
Traders were unsettled by HSBC’s £12.5bn cash call, the largest in British corporate history. The size of the fundraising, which was accompanied by news of more than $10bn in goodwill write-off’s related to the lender’s US business and a bigger than expected decline in profits, sparked concern about the bank, which so far has proved more resilient than its peers.
The worries sent HSBC tumbling to 393p, down 20 per cent or 98.2p. Standard Chartered lost 10.6 per cent or 71p to 593p, Lloyds Banking Group fell to 52.8p, down 9.4 per cent or 5.5p, and Barclays retreated to 85.6p, down 8.3 per cent or 7.8p.
A negative read-across from the sell-off on Wall Street on Friday night, and renewed fears for the financial health of Citigroup, were also blamed for the weak sentiment in London this morning.
Only three blue-chips managed to register gains. Lloyd’s of London insurer Amlin, up 11.2p at 354.2p, and the media group Pearson, up 1p at 660.5p, posted better than expected results, while Randgold Resources climbed to 3139p, up 7p, as investors sought to increase their exposure to gold, the traditional safe haven in times of economic and financial turmoil.
Marks & Spencer, down 4.4 per cent or 11.5p at 249.5p, was in focus after Credit Suisse reiterated its “underperform” stance on the retailer’s stock.
“We have studied M&S’s operating and financial performance over the tenure of the current management. We conclude that even before the current rapid deterioration of profitability, the company had made no financial progress outside of the £320m of largely supplier-funded cost savings initiated in 2004, and around £150m resulting from changes in accounting assumptions, related to expense realisation and the treatment of pension entries, by which the reported results in 2007/08 benefited,” the broker said, adding:
“Of greater concern has been the failure to address and reverse the company’s long-term drift towards a much older customer base. As at 2008, 48 per cent of expenditure on clothing and 65 per cent of main clothing shoppers were over the age of 55 –while 76 per cent of food shoppers are over 45 years old. This adds additional financial risk in 2009, in our view, given low investment returns on savings. It has also coincided with M&S’s General Merchandise like-for-like sales underperforming the UK clothing market in seven of the past nine years.”