- The Financial Services Authority relaxes its tough stance on banks' finances
- Markets fall further as IMF tells eurozone to hurry up and resolve the debt crisis
- But it's party time for hot stocks Wandisco and Providence Resources
(Update) The FTSE 100 fell 26 points to 5,784 as fears about corporate profits in the global slowdown offset the effect of efforts by the Financial Services Authority to relax the financial pressures on banks’ balance sheets.
FSA and King reflate banks
Lloyds Banking Group (LLOY.L) leaped 3.4% to 38.28p after Andrew Bailey, head of the FSA's prudential business unit, told the Financial Times that banks would not be required to hold extra capital against new UK loans they made under the Bank of England's 'funding for lending' scheme.
Banks will also no longer be required to achieve a 'core ratio' equal to 10% of their assets by the end of next year. Instead each bank will be given a specific and undisclosed target of their own. 'The goal is to avoid rapid deleveraging that would harm activity in the economy,' Bailey told the paper.
The FSA's softer stance makes it less likely that banks will need to resort to rights issues to raise more capital from shareholders. Royal Bank of Scotland (RBS.L) rallied 1.8% to 262p despite separate reports that the bank has had to cut the listing price of its Direct Line insurance subsidiary to between 170p and 177.5p. Barclays (BARC.L) gained 1.1% to 224p.
Cormac Leech, banking analyst at Liberum Capital, pointed to last night's speech by Mervyn King in which the Bank of England governor said it might be right for the central bank to 'aim off' its 2% inflation target to avoid future financial crises. 'The FSA and Bank of England shift to a more reflationary macroeconomic stance is likely to support banks' return on equity and valuations,' Leech said in a note to clients.
IMF latest warning underlines growth fears
Miners led the FTSE 100 lower for its third session in a row after US aluminium giant Alcoa warned overnight of slowing demand from China. Polymetal (POLYP.L) fell 2.8% to £11.23 with Fresnillo (FRES.L) and Antofagasta (ANTO.L) falling 2.8% and 2% respectively as metal prices retreated.
Anglo American (AAL.L) bucked the trend gaining 0.8% to £18.28 after falls in recent days.
A fresh warning from the International Monetary Fund that Europe's politicians and regulators needed to redouble their efforts to strengthen the eurozone also weighed further on sentiment. The IMF's reduction in its global forecasts yesterday saw stock markets in Asia and the US fall overnight. Its latest report pushed the Euronext 100 index nearly three points or 0.4% lower to 646.5 as the IMF said the eurozone debt crisis was the biggest threat to global security.
Uncertainty over whether Spain will seek a bailout pushed the country's bond yields - and therefore its future level of borrowing - towards 6%.
On currency markets both the pound and the euro shed their earlier gains to trade down against the dollar at $1.5998 and $1.2858 respectively.
Gold also retreated in the face of the strong dollar, down 0.11% to $1,761 an ounce. However, oil rose with the Brent spot price trading at over $115 a barrel.
Party time for Wandisco and Providence
Wandisco (WAND.L), the hot tech stock that floated earlier this year, soared 33p or 8% to 434p after better-than-expected third quarter trading statement. George O'Connor of Panmure said the stock displayed 'accelerating operational momentum' and upgraded it to 'buy' from 'hold' with his target price raised to 459p from 359p. The company is backed by the Cazenove UK Smaller Companies fund managed by Citywire AAA-rated Paul Marriage.
Please visit our full site to view this interactive chart
Providence Resources (PRR.L), another of the year's hot stocks, gained 10p or 1.4% to 705p as the Irish oil explorer said it expected to recover more oil from its Barryroe field than had been expected. The stock is a top 10 holding of the Marlborough Special Situations fund managed by Giles Hargreaves, who is also AAA-rated by Citywire.
Liberum Capital, which has Providence as a 'buy', increased its estimate of recoverable reserves to 280 million barrels of oil from 200 million and raised its price taget for the shares from £19.80 to £22.
It said: 'The announcement confirms Barryroe is a very material oil field sitting in a benign development environment and favourable fiscal regime. We believe the market has so far failed to recognise half the value in this core asset, let alone the upside potential in gas and prospective resources.'
Asos gets Bostock at last
Among the bigger stocks Asos (ASOS.L) gained 4p to 22.90 after the online fashion retailer confirmed that Kate Bostock, the highly regarded former head of general merchandise at Marks & Spencer (MKS.L), had been hired as executive director in charge of product and trading. Oriel Securities repeated its 'buy' rating saying Asos' ambition to build a 4% share of the global clothing market had taken 'a serious step forward'.
Smith & Nephew (SN.L) slid 2.8% to 653.5p as shares in the medical devices group traded ex-dividend and were rated a ‘sell’ by analysts at SocGen.
BAE Systems (BAES.L) shed 2.75p or 0.8% to 322.6p on reports that Germany has threatened to block the proposed merger with aerospace giant EADS. The two companies have until 4pm today to declare their intentions, although the deadline could be moved.
BP (BP.L) softened 2.8p to 434.8p as growth concerns outweighed the chief executive of Rosneft, the Russian state-owned oil company, telling the Financial Times that president Vladimir Putin backed BP’s plan to sell its 50% stake in its TNK-BP joint venture to Rosneft.
Man Group (EMG.L) gained 4.8p or 5.3% to 94.75p as the Daily Mail revived bid speculation around the hedge fund manager, saying fund manager Blackrock and other shareholders were lining up a 140p per share cash bid. The shares have fallen 24% this year valuing the group at £1.7 billion.
Thorntons (THT.L) dipped 0.5% to 30.3p after a first quarter trading statement showed a 1% fall in sales at the chocolate shop chain.
Oxford BioMedica (OXB.L) fell nearly 7% to 2.56p after it closed a phase II study in US of its Trovax treatment for patients with prostate cancer.
For more on the day's main risers and fallers see our FTSE pages.