Part-nationalised group Royal Bank of Scotland was under pressure after an analyst who had been a cheerleader for the stock this year downgraded it to "neutral". In a report titled Cold Feet? Ian Gordon said he now saw better risk/reward for investors in Barclays and Lloyds Banking Group.
RBS has outperformed rivals at home and on the Continent this year, as it has set about cleaning up its balance sheet and the general operating environment has become more stable. Mr Gordon said the near 30 per cent rally prompted him to downgrade the stock.
"Given such a large number of apparent value opportunities elsewhere, and the strong run that RBS has already enjoyed, we downgrade our (relative) recommendation," he said, pointing out that Obama's bank levy also added downside risks. RBS closed down 2p to 33.33p, and dragged the others with it. Barclays gave up 23.15p to 272.2p, and Lloyds closed 3.75p lower to 51.25p, not helped by Banco Santander in Spain upping its bad loan provisions.
It was a bad day for the FTSE 100, as the miners and oil stocks joined the banks to knock it 113.8 points lower at 5,139. Sentiment turned heavily against the miners as the dollar strengthened. "The miners have taken a tumble as there are a few new shorts out there," one senior trader said. "They are especially targeting the copper plays." Kazakhmys, which is big in copper, gave up almost 10 per cent. It closed worst on the day, down 126p to 1,199p. Antofagasta, second worst on Wednesday after it missed its production numbers for copper, took the same position yesterday. The Chilean miner's tailspin intensified, falling a further 66.5p to 837p .
BP's shares had plunged on an update on Tuesday, and Royal Dutch Shell followed the same path during yesterday's session. The Anglo-Dutch group said earnings plunged to $1.2bn in the fourth quarter from $4.8bn a year before, and its chief executive, Peter Voser, added that his outlook for 2010 was "not rosy". The shares gave up 43.5p to 1666p. The knock-on effect was felt by rival BG Group, which reports today, closing down 18.5p at 1149p.
The biggest blue chip riser, out of a list of five stocks, was Vodafone whose third-quarter update was cheered by the market. The UK mobile phone giant rose to an almost one-month high as it closed up 4.8p to 139.3p as the 10 per cent lift in group revenue to £11.5bn came as a pleasant surprise to analysts. It said adjusted operating profit for 2010 would be at the upper end of its forecast range. Bernstein analyst Robin Bienenstock said the results were "free of torpedoes".
There was not much left to chose from, as the early support for the defensives ebbed away. British American Tobacco was up for much of the day, but slipped into the red, closing down 13p at 2071.5p.
GlaxoSmithKline, another traditional defensive, managed to stay in positive territory after the group's consumer healthcare sales grew 7 per cent, with Sensodyne and Horlicks the standout performers. Lucozade on the other hand had apparently lost its fizz. The announcement of additional cost savings of £500m by 2012 was also welcome and the shares ended the day up 9p at 1226p.
On the second tier, the standout performer by some margin was Yell Group. The indebted directories business, which runs Yellow Pages, recorded a remarkable jump after publishing its third-quarter numbers. The stock rose 6.5p, or nearly 18 per cent, to 43.35p. While revenues fell 8 per cent and ebitda was down 16.5 per cent, the management said it saw early signs that the declines were stabilising. The performance beat expectations and the group added that small-business customers were becoming more confident. Simon Whittington, an analyst at UBS, said it was a "good set of results for a stock where the mere absence of bad news often comes as a relief".
Carpetright was looking frayed at the other end of the FTSE 250, however, as the brokers turned on it. Deutsche Bank cut its rating from "buy" to "hold" while Seymour Pierce went further and took its "hold" to a "sell". It gave up 53.5p to 889.5p.
Budget airline easyJet did not manage to land in the black at the end of the session despite reporting a 10 per cent rise in passenger numbers in January and RBS analysts upgrading their recommendation to "buy" from "hold". It closed 3.5p down at 406.4p.
On the growth market, shares in alternative energy group Energetix rose on a deal win in the US. The group, whose products include one to make boilers more efficient, announced its Pnu Power subsidiary had won a contract from National Grid's operation in the US. Pnu power makes back-up power systems that store energy by using compressed air and is already being tested at a National Grid site in Cheshire. Shares in the group rose 3.3 per cent to 47p on the news. Alumasc, a UK group which supplies building and precision-engineering products, rose despite a 47 per cent drop in pre-tax profits to £1.9m. Its chief executive, Paul Hooper, called the performance "resilient" and in line with the board's expectations. His predictions that short-term conditions would remain challenging and fears of falling public sector expenditure did not stop the shares rising 6p to 99.5p.