Market update - 3 September

The FTSE 100 was down 111.8 points at 5508.9 while FTSE 250 was back at 9389.9, down 153.7 points, at 11.46am his morning. Consumer stocks gave back their gains from last night and Enterprise Inns, disheartened by a disappointing update from FTSE 250-listed peer Punch Taverns, slumped to the bottom of the FTSE 100, down more than 13 per cent or 41p at 266.25p. Punch, which scrapped its final dividend to conserve cash in the face of tougher trading conditions, was down 16.5 per cent or 52.25p at 264.5p.

“The mood is down again,” said one trader, highlighting the shift in sentiment from last week. Another trader pointed to overnight gains on Vix, or the Chicago Board Options Exchange Volatility index. Often called the fear index, Vix is a measure of the market’s expectation of volatility over the next 30 days. “Decent upward move… looking like it could well cross the 50 and 200 day moving averages – always a good indicator of troubling times ahead,” the trader said.

Beside consumer stocks, the banking sector was down, struggling under the pressure of adverse broker comment, a round of rumours suggesting that the European Central Bank was set to announce the closure of its discount lending window and concern about the Bank of England’s special liquidity scheme.

A “sell” note from analysts at the Royal Bank of Scotland bore on Barclays, down more than 4 per cent or 15p at 348.75p. The broker said that while Barclays remained an attractive longer-term investment proposition, in the near-term, it was faced with “substantial” balance sheet concerns.

“A deeply ingrained performance-led culture facilitated the generation of £8.3bn of economic profit of the last four years. It has, however, also led Barclays to a higher level of balance sheet gearing than peers, an uncomfortable position in the current environment of financial system de-leveraging and heightened external scrutiny of banks’ balance sheets,” the broker said.

In the wider sector, RBS was down 8p at 233.5p and HBOS slipped to 299.75p, down 10.25p. Alliance & Leicester, which is trading ex-dividend today, was down 22.5p at 317.5p.

Moving up

Only 5 companies were in the black on the FTSE 100. BP, which was added to the “buy” list at Goldman Sachs this morning, was the strongest, up 5p at 516.5p. Tullow Oil gained 3.5p to 754p after positive a positive update on its Ugandan operations. Bargain hunting took the Eurasian Natural Resources Corporation up 4p to 932p and Lonmin to 3436p, up 4p. The stronger dollar supported BAE Systems, which was up 2.75p at 485.75p.

Moving down

The house builders fell back as the effect of last nights short covering evaporated. Barratt Developments was the weakest, down 9.17 per cent or 15p at 148.5p and Taylor Wimpey eased back to 56.5p, down 4.25p. Persimmon, which is trading ex-dividend today, was down 22.5p at 401.75p.