Market Report: Rare bright note for RBS and its investors

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The Independent Online

Royal Bank of Scotland has had a miserable week. The European authorities have ordered it to flog bits of itself it would rather have kept; the taxpayer has increased its effective stake to 84 per cent; and yesterday, to cap it all, the group issued a woeful market update.

However, with all the bad news at RBS out of the way, for now at least, investors finally gave the battered shares a break, sending the bank to the summit of the FTSE 100 leaderboard for a time. The shares put on 1.8p to close at 37.1p, giving the bank's unfortunate staff, who will only receive shares, rather than cash as a bonus, a boost.

The climbs of yesterday, however, cannot mask the 18.8 per cent drop in the stock in the last week, making it a costly five days for UK plc.

If any group's numbers were worse than RBS's yesterday, it was British Airways, which said that it had managed to lose £292m in the six months to the end of September. Despite being told in advance that BA's numbers were likely to cause turbulence, the group's announcement was worse than some had been expecting. Investors who had already adopted the brace position backed the group, sending the shares up by 12.5p to 198.8p. The group finished on top of the index.

The rest of the FTSE 100 maintained its form of most of the week, trading up marginally for a third consecutive day, closing up 17.08 points at 5142.72.

After enduring a tepid week, a number of financial stocks ended the week in the top 10 performers. Lloyds Banking Group and Standard Chartered, the Asia-focused bank, were also among the favourites yesterday, benefiting from the market's decision to cease the public flogging of RBS. The banks put on 1.8p and 39p, to close at 37.1p and 1607p respectively.

News that the likes of Royal Dutch Shell and Google are hunting for new offices in London no doubt gave a spur to an increasingly confident Reit sector, with both Hammerson and Land Securities making an appearance on the FTSE 100 top 10 yesterday. JP Morgan analysts no doubt played a role in the hikes when it produced a note yesterday predicting that UK property values will climb 10 per cent in the next year, "with rents to rise from next year as the focus shifts back to the lack of supply". Hammerson saw its shares rise by 5.5p to 414.5p, while Land Securities stock put on 13.5p to end the day at 686.5p.

The listed hedge fund Man Group put on 4.7p to close the day at 329.5. Investors' confidence in the opaque world of hedge funds is clearly improving, especially after the firm announced on Thursday that it made a better-than-expected interim profit of $302m – about 8 per cent higher than the figure suggested by the group in its pre-close statement in September. Punters clearly overcame their doubts on Thursday when the shares dipped, no doubt assisted by the watchers at Charles Stanley who upgraded the company yesterday. "With an improvement in the investment performance also boosting funds under management we upgraded our recommendation from 'reduce' to 'hold' at the time of the pre-close statement. And we were pleased to see that the interim dividend has been maintained. If that is the case for the full-year dividend, then the stock yields around 8 per cent, which should underpin the share price," they said.

The rat catcher Rentokil Initial was pure poison yesterday, with the stock pulling down the rest of the FTSE 100. The group was one of the biggest winners on Thursday when the Financial Reporting Council, the watchdog that monitors the affairs of the big accountancy groups, said that the company's arrangement with KPMG met the spirit of its guidelines. KPMG saved Rentokil £1m, or almost a third of its annual audit bill last year, by adding some internal audit work to its external audit in a process it called "extended assurance services". The cheer was shortlived, however, as investors trousered Thursday's profits, sending the shares down 7p to 105p. The shares wheezed their way to the bottom of the FTSE 100, despite the group announcing an 82 per cent increase in third-quarter profits, adding that its five-year turnaround plan was on track – vermin, you have been warned.

Despite the bonhomie from some of the other financial stocks on the FTSE 100, the masters of the universe at the private equity group 3i could do nothing to stop the firm slipping by 3.5p to close the day on 271.3p.

The news came despite 3i, which owns the lingerie group Agent Provocateur among others, saying on Thursday that it would increase its interim dividend from 2.2p from 2.1p.

The Anglo-South African insurer Old Mutual joined 3i in the doldrums, falling 2.5p to close at 106.4p, despite analysts at Deutsche Bank raising their price target for the group to 130p.

The FTSE 250 fared in much the same way as the exchange's first division, closing the day up 62.29 points at 9082.59. The property investment group Grainger was the star attraction on the day, closing up 17.4p at 271p. Yesterday's jump marked a recovery after the stock lost nearly 15 per cent of its value earlier in the week. The company said on Thursday that it aiming to tap investors for £238m in rights issue to pay down debt.

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