Market update - 25 June

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The FTSE 100 was up 24.7 points at 5659.4 at 11.23am on Wednesday - Barclays led the blue-chip advance and climbed by almost 6 per cent or 18.25p to 329p after launching its long-expected £4.5bn cash call and announcing a plan to bring in new investors, including the Qatar Investment Authority and Japan’s Sumitomo Mitsui Banking Corporation.

“The Royal Bank of Scotland raised the bar for core equity Tier 1 ratios towards 6 per cent, HBOS are issuing up to 6.5 per cent and Barclays here state an expectation of 6.3 per cent (trailing) following this raise,” said Collins Stewart, which maintained its “sell” rating on the stock.

The broker added: “This removes one of the main bear points surrounding the stock in recent times… Management also briefly reiterated its guidance on trading from 16th June – in short, no new profit warning, which is also a (mild) positive.”

The news cheered the remainder of the banking sector and HBOS, at second place on the leader board, swung past its 275p per share rights issue offer price, up 5.46 per cent or 15p to 289.75p. The Royal Bank of Scotland, at third place, was up 4.56 per cent or 10p at 229.25p and Standard Chartered, at seventh place, gained 3.28 per cent or 49p to 1542p.

Moving up

Beside the banks, the retail sector also bounced as investors displayed fresh confidence following the latest CBI Distributive Trades survey, which while still indicating tough conditions on the high street, came in better than expected – thirty nine per cent of retail respondents reported that in the first half of June sales were lower than a year ago, while 30 per cent said sales had increased.

Kingfisher was the strongest, at fourth place on the FTSE 100, up 5.1p at 117.5p. Next gained 38p to 997.5p, J Sainsbury rose by 10.25p to 325p and Tesco climbed by 6.6p to 371.7p.

On the FTSE 250, Beazley group advanced by 8.85 per cent or 8.5p to 104.5p after Credit Suisse revised its recommendation on the stock to “outperform” from “neutral”.

“We view the appointment of Andrew Horton as CEO while Andrew Beazley becomes Deputy Chairman as a strong internal appointment that is unlikely to prompt major changes in group strategy. Although the departure of Johnny Rowell, head of the group's Specialty Lines division, is disappointing, he was not actively underwriting any business and intends to take some time out of the market, so any loss of staff or clients should be limited in the short-term,” the broker said, adding:

“We believe that Beazley's differentiated portfolio with 51% of premiums in longer tail lines will help it withstand the current pressure on pricing better than some of its peers. We expect significant further reserve releases from the specialty lines book with £13.4m and £25.5m in the 2003 and 2004 underwriting years respectively, and potentially more to come from 2005 and 2006.”

Moving down

Lloyds TSB missed out on the banking sector rally and lost 2.25p to 323.5p – the weakness was borne of rumours that the group is planning a bid for Deutsche Post Bank. The talk follows earlier speculation that Lloyds was eyeing Dresdner Bank.

United Utilities is trading ex-dividend today – as a result, the stock was weak and lodged at the bottom of the benchmark index, down more than 4 per cent or 31.5p at 690.5p.

Finally, the miners were down as investors took profits. Anglo American, which has come under fire for plans invest in a platinum mine in Robert Mugabe’s Zimbabwe, was the worst off – the company lost 134p to 3292p.

Xstrata was down 137p at 4016p, Rio Tinto was down 185p at 5825p and BHP Billiton was weaker by 53p at 1858p.