Market Report: Lloyds retreats as investors bank gains

Lloyds Banking Group led UK-focused banks lower last night, falling behind as the FTSE 100 briefly turned positive for the year.

The profit-taking was triggered by nervousness ahead of the results of regulatory stress tests on American banks, which are expected to indicate the need for additional capital in parts of the sector.

Valuation calls by market analysts also spooked investors, with ING saying that, following the recent surge in sector share prices, the risk-reward profile of UK banks was "unappealing". ING lowered its target price for Lloyds to 105p, below last night's closing price of 113.2p, down 6.5 per cent or 7.9p.

UBS also weighed in, downgrading both Barclays, which retreated 3.4 per cent, or 10p, to 288p, and Royal Bank of Scotland, which fell 4.8 per cent, or 2.3p, to 45.7p, to "sell". ING set a 260p target for Barclays, and 40p target for RBS.

Overall, the FTSE 100 index of blue-chip shares touched a session high of 4,437.61 – just above the 4,434.17 level where it began 2009 – before relaxing to 4,396.49, up 1.4 per cent or 59.55 points, at the close. The FTSE 250 was also firm, gaining 34.37 points to 7,871.2.

The benchmark was supported by positive corporate news, with Sage, which said first-half revenues had climbed 17 per cent, gaining 5.8 per cent or 10.7p to 196p, and Tullow Oil, which announced another Ugandan oil find, rising to 890.5p, up 4.2 per cent or 35.5p.

Intertek, the testing equipment specialist which was the focus of bid talk late last month, was 7.2 per cent or 77p ahead at 1,143p after UBS upped its estimates following strong first-quarter numbers from its French rival Bureau Veritas. Specifically, the broker highlighted the 38 per cent growth, in organic terms, at the rival group's consumer division, saying that the consumer business was key at Intertek, where it accounts for around 27 per cent of sales and 50 per cent of profits.

On the downside, a number of ex-dividend stocks weighed on the FTSE 100, with Drax losing 7.1 per cent or 36.5p to 479p, and Antofagasta falling to 603.5p, down 6.4 per cent or 41.5p.

Bunzl, which was also trading ex-dividend, lost 4.2 per cent or 23p to 523p.

On the second tier, the software group Misys climbed to 160p, up 4.1 per cent or 6.25p, after Merrill Lynch moved the stock to "buy" from "neutral", saying that investors were likely to begin ascribing more value to the company's banking unit.

"During the first-quarter results season, every single exposed vendor (IBM, Capgemini, Temenos) talked about early signs of raising interest levels in the banking sector," the broker said. "While this does not mean the world is back to normality, it nonetheless highlights that banking IT spending will probably recover before other sectors like manufacturing."

DSG International was weak, losing 7.7 per cent or 3.25p to 39p, thanks to Morgan Stanley, which moved its recommendation on the stock to "equal-weight" from "overweight", telling clients that, following the strength in shares since December, it no longer believed that the market was mis-pricing the electrical retail group's risk-reward profile.

"We remain as convinced as ever that the shares have very attractive upside potential if management can deliver on its plans of sustainable operating margin of 3-4 per cent in the medium term (which it has defined as three-five years)," the broker said. "However, trading is very poor and, unlike most UK retailers, deteriorating, with even most of the refitted stores seeing year-on-year sales declines."

Staffing firms, including Michael Page International, which was down 3.1 per cent or 8.75p at 276.25p, and Hays, which was down almost 4 per cent or 3.75p at 93.5p, were unsettled after Adecco, the Swiss recruiter and the world's biggest staffing firm, revealed a slump in first-quarter profits, while striking a cautious note on the outlook for the market for recruiters.

Elsewhere, Filtrona, the speciality plastics and fibre products supplier, fell to 118.5p, down 1.5p, after Panmure Gordon downgraded the stock to "hold" from "buy", telling clients that although the fibres business was likely to show improved results through the course of this year and the next, "pressure on the protection & finishing operations" may weigh on the group for the time being.

Among smaller companies, Innovation Group rallied again, climbing another 13.4 per cent or 1.3p to 11p, despite some negative comment from Altium, which moved the stock to "sell" from "buy".

"Although a trading update in April revealed an encouraging improvement in trading across parts of the group, it also left the door open to the group falling short of full-year expectations once more," the broker said, adding: "Additionally, while the gross cash balance (£25m) was ahead of expectations, [the company's] record on cash generation has been inconsistent at best and we feel that the company may need to raise more cash at some point in the not too distant future."

Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
Life and Style
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
Arts and Entertainment
Rita Ora will replace Kylie Minogue as a judge on The Voice 2015
Life and Style
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Life and Style
Arts and Entertainment
Tennis player Andy Murray's mum Judy has been paired with Anton du Beke for Strictly Come Dancing. 'I'm absolutely delighted,' she said.
tvJudy Murray 'struggling' to let Anton Du Beke take control on Strictly
Life and Style
Vote with your wallet: the app can help shoppers feel more informed about items on sale
lifeNew app reveals political leanings of food companies
David Moyes and Louis van Gaal
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

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits