Market update - 9 September

The FTSE 100 was up 53 points at 5499.3 while the FTSE 250 was down 9.4 points at 9260.6 at 12.10pm today. The London market was busy as traders attempted to make up for last night, when technical errors at the exchange kept them for transacting business for almost seven hours.

Financial stocks supplemented their earlier Fannie Mae/Freddie Mac inspired gains and the Royal Bank of Scotland was among the strongest on the FTSE 100, up 5.11 per cent or 12.5p at 257p. Barclays gained 16p to 371p and HBOS was up 15p at 322p. The latter was aided by positive comment from Goldman Sachs. The broker reiterated its “conviction buy” stance on the stock, noting that concerns about liquidity were “more than priced in”.

“HBOS has been under pressure with the primary focus on liquidity, in particular the revised ECB [European Central Bank] framework and the end of the UK Special Liquidity Scheme (SLS) in October. We believe that these fears are over done as HBOS continues to fund itself, raising £2.2bn since the end of June, and with the BOE [Bank of England] likely to release its Red Book review prior to the end of SLS. We believe current valuation ratios are supported and HBOS is the most strongly capitalized domestic UK bank. This is further supported, in our view, by management’s revised strategy focusing on franchise value and the continuing upward re-pricing of the mortgage market,” Goldman said, adding:

“The announcement of the Red Book review by the Bank of England prior to the end of the Special Liquidity Scheme, in our view, should provide further comfort in terms of liquidity. The IMS [interim management statement] on 19 November should also reassure that while credit costs continue to rise, margins are also rising and there should be no further material write-downs. We also believe potential asset sales, whether whole businesses or loan books, would also be viewed positively by the market. We estimate that a sale of the whole Australian business could add 130 bp [basis points] to the equity Tier 1 ratio.”

Moving up

Airlines fared well as the oil price eased ahead of a meeting of the OPEC cartel in Vienna. As a result, British Airways gained 11.5p to 264.5p and Easyjet was up 18p at 366.75p.

ITV, which is pegged to vacate its spot on the benchmark index in the upcoming reshuffle, gained 2.4p to 46.4p after announcing the appointment of former EMAP executive Ian Griffiths as group finance director.

Moving down

Weaker commodity prices bore on the heavyweight mining and oil stocks and Kazakhmys slipped to first place on the FTSE 100 loser board, down 7.47 per cent or 74.5p at 922.5p. Cairn Energy, the India-focused oil explorer and producer, was down 5.47 per cent or 147p at 2539p.

Enterprise Inns was the focus of some selling again – the stock was down 8.5p at 277.25p as traders cast the company as likely candidate for demotion to the mid-cap FTSE 250 index.

Also on the downside, pharma group Shire eased back to 931p, down 29p, after Goldman Sachs switched its stance on the stock to “neutral” from “buy”.

Among the mid-caps, QinetiQ was down more than 8 per cent or 18p at 205.5p after the UK Ministry of Defence announced the sale of its stake in the company.