Market Report: Deutsche gives nod to embattled banks

Britain's banks have had a torrid time of late – and deservedly so. Money-laundering, mis-selling and excessive bonuses are just some of the issues that have eroded investor confidence in a sector, that has been up against the wall since 2007.

Analysts at Deutsche Bank reckon it's time to put these issues aside and pile back into the industry, with HSBC and Standard Chartered among their top tips.

The broker was particularly bullish on HSBC, forecasting a recovery in its US business and raising its rating from Hold to Buy.

"We expect HSBC's underlying earnings to be driven by the recovery in the US and an improving outlook in Asia," it said in a note. "Putting aside the risk of the US fiscal cliff, data out of the US point to an improving US housing market – a source of pain for HSBC's run-off mortgage portfolio of $44bn which has taken cumulative losses of 30 per cent so far. Though the speed of housing recovery is modest, we expect HSBC to show better progress in this non-core book through customer deleveraging and asset sales."

Shares in HSBC were up for most of the day before ending down 0.4p at 643.4p. Standard Chartered rose 9p to £15.01.

Overall, the London markets slipped into negative territory, dampening hopes of a Santa Rally – a festive phenomenon where stock markets rise in the lead-up to Christmas.

The FTSE 100 index fell 16.24 points to 5929.61 while the wider FTSE 250 dipped 12.74 points to 12,211.57 as investors digested the latest round of monetary stimulus in the US.

The FTSE rebounded from its lows but spent the whole day in the red as fears grew about the looming fiscal cliff. Without a resolution soon, the usual Christmas rally could come to a very quick and abrupt end as investors prepare themselves for the worst.

"The automatic budget cuts and tax increases in the US that are due come into force in the New Year could have a crippling effect on the world's largest economy and as such the global economy too which is why investors remain cautious."

Gold miner Centamin slid to a seven-month low today as its quest for Egyptian riches hit the proverbial brick wall. Investors abandoned the company in their droves after it suspended operations at its flagship Sukari mine in the country because of a dispute over diesel.

The company said it had received an "illegal" $65m (£40m) claim from state-owned Egyptian General Petroleum Corporation (EGPC) for fuel supplied between December 2009 and January 2012.

EGPC has said it would not supply Centamin with any fuel until the money is paid. The miner said its fuel supplies are at critical levels.

"It is with regret that, due to a resultant lack of diesel and a shortfall in working capital in Egypt for the local operations the decision has been taken to suspend operations at Sukari and to place the mine on care and maintenance until these issues are satisfactorily resolved," the company said.

Shares in Centamin tumbled 25p – or 47 per cent – to 27.7p, their lowest level since late 2005.

Engineer John Wood Group was one of the day's big losers, retreating 35p to 733.5p despite an upbeat trading update in which it said it full-year performance was likely to be in line with expectations.

AstraZeneca fell 84p to 2958p as the pharmaceuticals group was hit by a testing setback.

The company's rheumatoid arthritis drug proved to be less effective than one from rival Abbott Laboratories in a study, spooking investors.

Elsewhere, Tui Travel retreated 3.6p to 282.5p after it was confirmed the company would be promoted to the FTSE 100 in a reshuffle later this month, replacing utilities group Pennon.

Tui's promotion comes on the back of an 80 per cent share-price rally since the middle of the year. The group posted a 40 per cent increase in pre-tax profits last year as British holidaymakers ditched the staycation in favour of overseas holidays.

Direct Line Group, the motor insurer spun off from Royal Bank of Scotland, in October will join the FTSE 250 index in the Christmas Eve shake-up alongside pubs group Enterprise Inns and United Drug.

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