Market update - 26 February

The FTSE 100 was 58.35 points ahead at 3907.33 while the FTSE 250 advanced to 6096.53, up 54.38 points, at around 11.55 am this morning.

The banking sector dominated the market, shrugging off news of record losses and another state-backed capital injection at Royal Bank of Scotland – 22.94 per cent or 5.3p ahead at 28.43p – after the Government launched its long anticipated asset protection scheme, which will see the taxpayer protect lenders against further losses on toxic assets.

Sandy Chen, the bearish banking analyst at Panmure Gordon, remained cautious, saying that while the favourable pricing of the scheme, along with the additional capital injection from the Government, will remove the immediate capital concerns around the bank, his team still had “concerns about further losses and capital strains, particularly in the £991bn of derivatives”.

“We expect these concerns will crystallise over the next 6 months; for now, the markets will probably focus on the favourable terms of the bailout,” he added.

Bill McNamara, technical analyst at Charles Stanley, weighed in on the latter point, saying that RBS may climb as high at 34p if market sentiment remains buoyant.

“From a purely technical perspective RBS could soon start to look interesting… the shares have moved well above the lows that formed last month (at 10.3p) and following that rise they have moved into a consolidation phase,” he said,

“Today’s price action however appears to be lifting them out of that band and the next challenge will be to break out of the short-term downtrend, currently implying resistance at around 31.5p. If that is exceeded then we could see a push up to 34p or so, at which point the shares will have retraced 50 per cent of the decline since last month (when they were changing hands at 57p).”

Lloyd Banking Group traded higher with RBS, gaining 14.5p to 71.9p as the market awaited details of its participation in the scheme, more news on which is expected with bank’s full year results tomorrow.

Moving up

Kingfisher, the FTSE 100-listed home improved retail group, gained 4.2p to 133.4p after HSBC switched its stance on the stock to “neutral” from “underweight”. The broker also turned more positive on Next, which was upgraded to “overweight” from “neutral” and gained 35p to 1178p.

Moving down

Oil-related stocks were on the back foot amid speculation about the fate of BP’s dividend, which was rumoured to be at risk owing to the weak oil price outlook.

BP was down 8.2p at 456.2p while BG lost 12p to 998p. Cairn Energy was 27p behind at 1889p.