Energy provider SSE (SSE.L) was amongst the FTSE 100 fallers this morning as regulator Ofgem ordered an inquiry into the UK energy market.
The FTSE was down 27 points, or 0.4% at 6,578 as Ofgem's announcement, results from US bank stress tests and ongoing tensions between the West and Russia weighed on the UK blue-chip index.
Ofgem has called on the Competition and Markets Authority to undertake an investigation into the UK's energy sector, against a backdrop of regular allegations that the big six providers are ripping off consumers.
Of the two of the big six listed in London, SSE was down 23p, or 1.5% at £14.94p while British Gas parent company Centrica (CNA.L) was up marginally, by 1.9p or 0.6% at 325p.
Peter Atherton, analyst at Liberum, downgraded SSE to 'hold' given the Ofgem action and the company's announcement yesterday that it would freeze energy bills until 2016 but also cut jobs in order to protect its dividend. He argued a further re-rating was unlikely as the shares had now recovered all the ground lost in the autumn, when Labour leader Ed Milliband called for an energy price freeze. Atherton has set a target price of £15.20 for the stock.
Banks HSBC (HSBA.L) and Royal Bank of Scotland (RBS.L) were meanwhile down after their US arms were blocked from paying higher dividends or buying back their shares, after failing US Federal Reserve stress tests.
HSBC dipped 3.2p, or 0.5%, to 608p. It said in a statement to the market the Fed had judged there to be weaknesses in the capital planning process for its US arm. Shore Capital analyst Gary Greenwood said the situation for RBS, down 4.3p or 1.4% at 301p, appeared more serious, as it could delay the disposal process for its US arm Citizens. RBS currently plans an initial public offering of a stake in Citizens in the fourth quarter of the year, with a full exit planned by the end of 2016. Shore Capital has retained a neutral stance on both stocks.
Engineering group Babcock (BAB.L) was the biggest FTSE faller, dropping 75p or 5.5% to £12.91, after announcing the acquisition of helicopter group Avincis with a £1.1 billion rights issue. Panmure Gordon analysts Mike Allen and Paul Jones placed the stock on hold with a £13.50 target price, arguing that while the deal would enhance earnings in the first year and the impact on the balance sheet would be manageable, it lacked cost synergies and the implied valuation of the business was 'not particularly cheap'.
Miners fell, with Tullow Oil (TLW.L), Fresnillo (FRES.L), Randgold (RRS.L), Anglo American (AAL.L) and Glencore (GLEN.L) all off the pace. Of those, Tullow Oil suffered the biggest drop, falling 26.5p, or 3.4% to 750p after announcing mixed results from three drilling operations in Kenya. Analysts at Liberum said they expected Tullow to continue to add value from its African operations and maintained its buy rating on the stock.
Sterling meanwhile rose to a three-week high against the euro after data from the Office for National Statistics showed continued growth in the retail sector. Retail sales in February were at higher levels than expected, up 1.7% compared to January, reversing a 2% drop, and 3.7% up on the same time last year. The euro is trading at 82.75p.
Investors are looking ahead to this afternoon's update from the US of fourth quarter economic growth.