Market Report: Effect of eurozone deal short-lived for UK banks
As rallies go, the banks' didn't exactly last long.
Just one day after rising on hopes that the eurozone agreement might help sort out the region's sovereign debt crisis, Lloyds Banking Group, Royal Bank of Scotland and Barclays found themselves back in the shadows of their Asia-focused peers last night.
All three failed to extend Thursday's gains, with Lloyds and RBS the worst-hit – sliding 1.92p to 35.15p and 0.98p to 26.29p, respectively. Despite optimism that the deal struck in Brussels would spark a recovery in the two part-state-owned banks, JP Morgan Cazenove refused to lend its support, keeping its "underweight" rating for both.
The broker's analyst Raul Sinha was particularly cautious on the forbearance – where lenders help out borrowers at risk of default by easing their terms – shown by the banks. Saying that asset quality risks in the UK were being "underestimated" as a result, he warned that in the event of a downturn it could become"a £20bn plus issue for the sector".
Instead, Mr Sinha chose Standard Chartered and HSBC as his top two picks among the UK-listed banks, claiming that the asset quality risk across Asia was much lower. They climbed 8p to 1,523p and 10p to 565.3p, respectively, in response.
Mr Sinha also upgraded his rating for Barclays to "overweight", but this did not stop it being pegged back 8.8p to 201.2p, amid some caution ahead of the group kicking off the banks' reporting season on Monday
The increasing number of questions being asked about the debt crisis agreement only intensified after Italy's cost of borrowing soared, leaving the FTSE 100 unable to push on from Thursday's huge jump of nearly three per cent.
However, despite creeping back 11.58 points to 5,702.24, the top-tier index remains on course for its best month in over two decades, having gained more than 15 per cent since falling below 5,000 points at the start of October.
The fear of further bad news from Man Group knocked the world's biggest listed hedge fund manager back 7.5p to 153.4p. After the company revealed in September that clients had removed $2.6bn (£1.6bn) in cash over the previous three months, Bank of America Merrill Lynch warned that its interim results next week would reveal "significant cuts in ... performance fees", although the broker still kept its "buy" rating.
The prospect of next year's Olympics was exciting analysts at RBS, who predicted that the event would contribute to ITV's advertising increasing by five per cent over 2012. It also claimed that the X Factor broadcaster was "very cheap at these levels", helping it advance 1.3p to 66p.
Hammerson charged up 8.5p to 413.5p after revealing it was receiving €106m from selling part of its stake in the O'Parinor shopping centre near Paris. The property developer said it would put the cash back into future investments.
Drugs giant GlaxoSmithKline edged up 5p to 1,384p, as rumours refused to go away that it could be about to launch a $3.4bn approach for US biotech company Human Genome Sciences, despite analysts having rubbished the vague speculation.
Down on the FTSE 250, Dixons Retail retreated 0.57p to 12.03p amid fears over the electronics retailer's first-half results, which will be released next month. The high street chain was not exactly cheered by figures from GfK that showed consumer confidence dropping to its weakest level since February 2009, when the UK economy was in recession.
Elsewhere in retail, Mothercare slipped back 1p to 179p after Seymour Pierce's Kate Calvert slashed her target price by nearly two-thirds to 176p. The analyst said her own experience as an expectant first-time mum had "reinforced my view that Mothercare has lost its modern day relevance", attacking its "unfashionable range and uncompetitive pricing".
Exillon Energy grabbed pole position on the mid-tier index by spurting up 12.82 per cent to 320.4p. The oil producer's share price has now managed to rise nearly a fifth since it announced a 53 per cent rise in its average daily production earlier in the week.
Hopes that a new bid could be imminent continued to push Alterian up on the small-cap index. The marketing technology group was lifted 10p to 93p in response to vague rumours that it may be about to receive a 100p a share approach, after it rejected an offer recently from mid-tier software maker SDL (up 15p to 655p), worth 80p a pop.
Bagpuss and the Clangers are heading for a new home after Coolabi agreed to be taken over by North Promotions, leaving the alternative investment market-listed media group – which holds the rights to the children's favourites – 11.11 per cent higher at 7.5p.
FTSE 100 Risers
WPP 688p (up 11p, 1.62 per cent)
Even though it cuts its revenue outlook for the year, the world's largest advertising company still advances after promising to improve its margins.
Unilever 2,114p (up 12p, 0.57 per cent)
Persil-owner rises as Liberum Capital highlights positive read-across from fellow consumer goods behemoth Procter & Gamble's recent results.
FTSE 100 Fallers
Aviva 363p (down 12.5p, 3.3 per cent)
Insurer falls back after getting a boost on Thursday from the deal between leaders on the eurozone debt crisis plus the revival of bid speculation.
International Airlines Group 174.6p (down 5.8p, 3.22 per cent)
British Airways-owner hit by UBS cutting its target price to 240p from 260p and reducing its earnings forecasts ahead of next week's update.
FTSE 250 Risers
Elementis 150p (up 9.9p, 7.07 per cent)
Chemicals company jumps after announcing trading for the third-quarter is ahead of the same period the previous year, adding that it is on course to meet expectations.
New World Resources 598p (up 37p, 6.6 per cent)
Czech coal digger continues to climb in the wake of Thursday's trading update, in which it reiterated both its production and sales targets for the full year.
FTSE 250 Fallers
Croda International 1,733p (down 87p, 4.78 per cent)
Chemicals company still falling, meaning it has now lost nearly 9 per cent since releasing its third-quarter trading statement on Thursday.
Inchcape 337.7p (down 1.4p, 0.41 per cent)
Car dealership drops despite Panmure Gordon reiterating its "buy" recommendation following the group's interim management statement earlier in the week.
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