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FTSE flat as banks hold on to LTRO cash

Britain’s FTSE 100 closes a lacklustre week as European Central Bank loans fail to filter through to the wider market.

 
FTSE flat as banks hold on to LTRO cash

Britain’s FTSE was flat as it emerged that loans given by the European Central Bank (ECB) have not yet filtered out into the wider economy.

The benchmark UK index of blue-chip shares shed 0.34%, or 20 points, to 5,931 and the Mid-250 index inched up 0.03%, or three points, to 11,535. The FTSE 100 index has lost 24 points this week, and the FTSE 250 has taken on 11 points.

Kazakhmys (KAZ.L) fell 62p, or 5.8% to £10.00 as analysts at Numis cut the miner’s target price from £11.00 to 950p and downgraded the stock from ‘hold’ to ‘reduce’. Société Générale also lowered their outlook on the shares from ‘buy’ to ‘hold’.

The downgrades come following the miner’s poor 2011 profits, due to increasing costs.

However, brokers at JP Morgan weren’t disillusioned by the results, and raised their target price on the stock from 920p to £11.60. See the FTSE’s performance and the index’s top risers and fallers.

LTRO cash stays in banks

European banks deposited €776.9 billion at the ECB overnight, a 66% increase on Thursday’s figure, as loans through the long term refinancing operation (LTRO) were not distributed out into the wider market.

The cash is intended to boost liquidity and bank lending, but the figures indicate that much of the money has remained in the banking system.  

Brenda Kelly, senior market strategist at CMC Markets, said: ‘The revelation that just under half of Wednesday's LTRO has ended up on overnight deposit at the ECB has eroded confidence that the money will find its way into the European economy.

‘If the ratification of the fiscal compact by 25 of the 27 European nations was intended to inspire confidence, it has so far failed to do so given that markets remain concerned about how EU leaders intend to solve the problem of a lack of growth.’

Other stock markets in Europe also gave a lacklustre performance: Germany’s DAX index shed 0.29% to 6,922, France's CAC 40 index added 0.09% to 3,502, and the FTSEurofirst 300 index of top European shares crept up 0.08% to 1,089.

Stateside markets were also concerned by the developments. The Dow Jones Industrial Average fell 0.23% to 12,950, the Standard & Poor's 500 index slipped 0.14% to 1,372, and the Nasdaq Composite index dropped 0.26% to 2,981.

Sterling weakened 0.7% against the dollar to $1.5840, and rose 0.17% against the euro to €1.2007. The dollar index, which tracks the greenback’s performance against a basket of major currencies, strengthened 0.72%, to 79.4 cents.

International Power rises on bid rumours

International Power (IPR.L) rose to the top of the FTSE 100 index, adding 15.4p, or 4.4% to 365.5p on speculation GDF Suez may offer a 450p cash bid for the remaining 30% of company shares it doesn’t own.

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