Market Report: Lloyds in focus on hopes of strong capital buffers

Lloyds Banking Group was in focus as traders studied forecasts of strong capital buffers last night.

Deutsche Bank said that, on the basis of the Basel II banking capital rules, Lloyds' buffer against unexpected losses – the so-called core tier one capital ratio – was on course to stand at 14.3 per cent in 2013. Crucially, even if the recently agreed Basel III norms are fully implemented, the bank is likely to boast about £10bn of surplus capital by that time.

"We expect the bank to produce more capital than it can deploy, having to grow loans by 17 per cent more than we forecast in order to hold capital ratios flat after forecast dividends," Deutsche explained, revising its target for the stock to 100p from 90p. Lloyds touched a high of 79.15p before relaxing to close at 76.9p, down 0.5p. Lloyds was also the subject of some comment from Goldman Sachs, whose analysts upped their target to 106p from 97p.

Goldman said that while chief executive Eric Daniels's decision to retire next year should been seen "as business as usual", it did "reflect Lloyds's significant progress towards normality", a process which has also encompassed the integration of HBOS, the strengthening of the capital base and the restructuring of the loan book.

Overall, the markets fell back, with the FTSE 100 easing by 26.35 points to 5,576.19 and FTSE 250 losing 3.12 points to 10,545.07.

All eyes were on the US Federal Reserve, which was due to issue a post-meeting policy statement after the close of business in London. Traders were divided on whether the American central bank would signal the need for further moves to increase the money supply, with most economists expecting the assembled policymakers to decided against taking any action at this stage.

A nod in the direction of further stimulus is expected to weigh on the dollar, which in turn is likely to drive gains on the commodity markets. Ahead of the meeting, profit-taking weighed on the mining sector as investors awaited further clarity on the course of US monetary policy. As a result, the likes of Lonmin, Anglo American and Antofagasta ended the session on a negative note, falling by 18p to 1,672p, 17p to 2,529.5p and 12p to 1,177p respectively. Vedanta Resources bucked the trend, however, and claimed pole position on the FTSE 100 with a 49p gain to 2,202p.

On the downside, the British Gas owner Centrica gave back 7p to close at 334p amid speculation that it could step in the way of GDF Suez's plans to take control of International Power, which gained 1.8p to 388.6p. The rumours, which suggested that Centrica was mulling a counter bid, were thin on detail, and failed to gain much traction. Though lower, Centrica's shares were in step with the trend in the wider market. Elsewhere, oil services stocks attracted buyers following confirmation of bid interest in Wellstream, the flexible pipes specialist whose shares rallied by nearly 30 per cent, or 176p, to 785p after it announced the receipt of several approaches.

The gains, partly pinned on short covering, boosted the mood across the wider sector, with Wood Group swelling by 25.6p to 416.2p and Hunting, which was mentioned as a possible bidder for Wellstream earlier in the week, gaining 19p to 641.5p.

Further afield, publishing and events group Informa was 3.6 per cent, or 15.4p, behind at 412.1p after JP Morgan Cazenove published a wide-ranging media sector round-up, lowering the stock to "neutral" on valuation grounds. The broker was more positive on ITV. The broadcaster rose by 0.75p to 58.5p after being upped to "overweight" from "neutral".

"We believe that new ITV management is likely to keep costs under control and positive surprises on advertising revenues are likely to boost earnings per share momentum," JP Morgan said, adding the stock to its European "analyst conviction list".

Also on the upside, the emerging markets fund manager Ashmore, which cheered investors with a well-received set of full-year figures earlier this month, was 3.5p better off at 324.5p after KBC Peel Hunt upped its profit forecasts for 2011 by 12 per cent.

"To us, Ashmore seems well positioned take advantage of the increasing amount of assets being allocated to emerging market[s] product[s]. Investors are increasingly looking to diversify from developed economics and Ashmore has broadened its product range to offer clients more specific options," the broker said, upping its recommendation to "buy".

Turning to the rumour mill, and speculators were lining up the soap and shampoo manufacturer PZ Cussons as a potential target.

A bid of more than 400p, and possibly as much as 450p, was rumoured to be in the works. And although there were no clues about the identity of the suitor, the chatter proved potent enough to boost the company's shares by more than 10 per cent, or 35.1p, to 382.2p.

Takeover rumours were also evident around GKN, the aeroplane and car-parts manufacturer. The stock failed to respond, however, with GKN closing slightly lower at 167.6p, down 0.8p last night.

Teeth should be brushed twice a day to prevent tooth decay
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
Those who were encouraged to walk in a happy manner remembered less negative words
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
Renee Zellweger as Bridget Jones
ebooksAn unforgettable anthology of contemporary reportage
Life and Style

Board creates magnetic field to achieve lift

There have been various incidents of social media users inadvertently flouting the law

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Helpdesk Analyst

£23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

Senior Helpdesk Analyst / Service Desk Co-ordinator

£27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

Senior Pensions Administrator

£23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

Corporate Actions Administrator / Operations Administrator

£25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London