Market update - 20 March

The FTSE 100 was 9.4 points ahead at 3826.4 while the FTSE 250 retreated to 6237.4, down 24.1 points, at around 11.46am.

Barclays was amongst the weakest of the blue chips, easing to 108.7p, down 3.8p, after Morgan Stanley weighed in with a warning about capital requirements. The broker, which was one of the first to forecast HSBC’s mammoth rights issue, said rising bad debts, further structured credit write-downs and falling core banking revenues were likely to erode the lender’s capital buffer.

“Under our bull case valuation, we assume that a disposal of iShares (or some other large business) for an around £2.7bn gain, would be enough to meet capital requirements in this cycle,” the broker said,

“Under our base case, we assume a similar benefit from disposals as our bull case, but factor in a further £4bn in new equity, which is funded at 50p…. Under our bear case valuation, we assume that Barclays signs up to the Government Asset Protection Scheme, placing in £100bn of assets and issuing £12.6bn of B shares.”

Moving up

Insurance issues continued to draw steam from the recent better-than-forecast results from Prudential, which gained 7.1 per cent or 20.5p to 306p. Legal & General, which was upgraded to “buy” at S&P Equity Research this morning, was the strongest, rising by almost 10 per cent or 3.8p to 41.9p.

Elsewhere, Firstgroup climbed to 259p, up 6.5p, after Goldman Sachs moved the transport group’s stock to “neutral” from “sell”.

Positive broker sentiment also boosted Segro, the commercial property group which was 6p ahead at 139p after Deutsche Bank upped its stance to “buy” from “hold”.

Moving down

HSBC was almost 7 per cent or 27.4p behind at 365.75p as it began ex-rights trading.

The platinum miner Lonmin was also weak, losing 85p to 1390p, after Investec moved the stock to “sell” from “hold”, saying:

“We are concerned the share price has run away from underlying fundamentals and that it is now pricing in too much. Refinancing remains a risk and the new management team has yet to prove itself.”