Market update - 24 November

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The FTSE 100 was up 190.11 points at 3971.07 while the FTSE 250 climbed to 5679.51, up 188.05 points, at 11.58 am this morning.

The London market bounced on news that the US Government had thrown a lifeline to Citigroup, the banking giant whose share price slumped 60 per cent last week. Traders were also pleased with reports that President-elect Barack Obama was set to announce Timothy Geither, the New York Federal Reserve boss who engineered the rescue of Bear Stearns, as his nominee to replace Hank Paulson as US Treasury Secretary.

“It’s a classic relief rally – there was a lot of downward pressure last week and this news has given people a little bit of confidence,” said one trader. “But it is not likely to last very long. People are still pretty scared out there,” he added.

Moving up

Financial stocks were among the strongest this morning. Barclays, which is hosting a shareholders meeting in London, fared the best, gaining 11.11 per cent or 14.8p to 148p after chairman Marcus Agius said that a count of proxy votes indicated that bank’s £7bn capital raising plan was on track for approval.

In the wider sector, Lloyds TSB was up 9 per cent or 11.1p at 135.8p and HBOS gained 9.69 per cent or 7p to 80.3p.

Investors also waded back into the mining sector, which rebounded from last week’s losses. Kazakhmys, at first place on the FTSE 100 leader board, was the strongest, gaining 13.74 per cent or 24.7p to 204.5p, while Fresnillo, at second place, advanced to 119.1p, up 13.11 per cent or 13.8p.

Moving down

Standard Chartered, down 7.37 per cent or 56p at 703.5p, missed out the rally this morning after announcing plans for a £1.78bn right issue to bolster its balance sheet. The 30-for-91 issue will be priced at 390p per share, a 49 per cent discount to the Standard Chartered share price at Friday’s close.

The move come after months of speculation about the bank’s capital base and prompted a round of downgrades. Panmure Gordon reduced its 2009 earnings per share estimate to 103 cents from 188 cents while Cazenove moved its forecast to 182 cents from 237 cents.

Panmure also switched its stance on the stock to “sell” from “hold” saying, “Ironically, we had been sellers of Standard Chartered for the part few years on the view that the market had been over optimistic in its growth assumptions and we had recently turned holders on the view that the pessimism was overdone; the combination of the dilution from the rights issue and the weakening prospects for the global economy have overturned that view.”

Cazenove, on the other hand, stuck to its “neutral” recommendation. “As we have commented for several months, we believe that the issue of capital was hurting the valuation. We regard the capital raising as pre-emptive to the extent that it may prove unnecessary if consensus is correct and Asian economies slow rather than enter recession,” the broker said,

“Yet in these nervous markets, we believe that investors will welcome the stronger capital position at Standard Chartered.”