Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors
Markets

Banks lead Footsie lower on reports of higher PPI bill

The FTSE 100 Index was 10.8 points adrift at 5889.17p as oil prices continued their downward trend
Cityoflondon.jpg
The City fears banks could face a higher hit for insurance mis-selling

Britain's big banks were lower on Monday after reports that they are likely to have to set aside more money to cover the cost of payment protection insurance mis-selling.

Shares in the sector fell on news that the UK's four listed clearing banks and Santander UK were set to reveal a combined bill of at least £5bn when they report earnings for 2015 next month, according to Sky News.

That would result in the total cost of the scandal moving above £30bn, Sky cited insiders as saying.

Shares in Barclays (LON:BARC) dropped 5.1p to 185.65p, Royal Bank of Scotland (LON:RBS) dipped 6.4p to 255.7p, HSBC (LON:HSBA) gave up 4.25p to 475.3p and Lloyds Banking Group (LON:LLOY) was off 2.2p at 64.66p.

The FTSE 100 Index was 10.8 points adrift at 5889.17p as oil prices continued their downward trend, although they pared some of the losses earlier in the session.

A survey from the Confederation of British Industry (CBI) showed UK manufacturers still struggling, with the total orders balance falling to -15 in January from -7, below a consensus of -10.

Pantheon Macroeconomics' Samuel Tombs said: "The CBI Industrial Trends Survey for January and Q1 suggests that the manufacturing downturn is being prolonged by sluggish world trade and the still-strong pound."

DIY retailer Kingfisher (LON:KGF) was 16.6p down at 328.4p after announcing plans to return £600mln to shareholders, but saying its £800mln restructuring drive would hit profits in the first two years of the shake-up.

Ophir Energy (LON:OPHR) gained 4p to 88.15p on news that it had farmed out a 40% stake in its Fortuna LNG scheme in Equatorial Guinea, west Africa, to oil services group Schlumberger.

Shares in AFH Financial (LON:AFHP), a financial planning-led investment manager, were up 5p or 3% to 171.5p after the company increased its dividend by half.

Growth in orders for completion this year sent shares in shop-fitter Havelock Europa (LON:HVE) surging 2.25p, or 37.5%, to 8.25p.

Hurricane Energy (LON:HUR) rose 0.13p to 10p as the UK Continental shelf-focused group launched a search for a new finance chief as it revealed Nicholas Mardon-Taylor will retire from the role, as planned, at the end of this month.

Shares in Stellar Diamonds (LON:STEL) did a U-turn from earlier losses to stand 0.5p up at 10p as it found its biggest stone yet at a project in Guinea, although the average grade of all stones unearthed to date there was slightly lower than thought.

Shanta Gold (LON:SHG) has added more reserves at its New Luika mine in Tanzania with an upgrade to the Elizabeth Hill satellite. Shares rose 0.12p, or 2%, to 6.38p.

LONDON OPEN

The London market began the final week of January on the back foot as commodity and oil-related stocks fell.

The FTSE 100 Index dropped 31.01 points to 5869 as oil prices resumed their descent following a recovery late last week, with the price of a barrel of Brent crude dropping 3.1% to US$31.22.

Last week, BP (LON:BP.) chief executive Bob Dudley compared the current oil supply glut to the 1986 oil crisis and said he did not expect the situation to ease until next year.

Shares in BP were off 8.05p to 344.65p. Royal Dutch Shell (LON:RDSB) leaked 15p to 1373p and BG Group (LON:BG.) dropped 8.2p to 972p.

Miners were also taking a hit on continued jitters about the outlook for prices given Chinese economic uncertainty and global geopolitical concerns.

Anglo American (LON:AAL) subsided 4.4p to 222.3p, Rio Tinto (LON:RIO) backtracked 36p to 1617.5p, Glencore (LON:GLEN) reversed 1.06p to 77.52p and BHP Billiton (LON:BLT) shed 10p to 638.9p.

Elsewhere, DIY retailer Kingfisher (LON:KGF) was 15.9p down at 329.1p after announcing plans to return £600mln to shareholders, but saying its £800mln restructuring drive would hit profits in the first two years of the shake-up.

Shares in Stellar Diamonds (LON:STEL) lost their sparkle by 0.7p to 8.8p as it found its biggest stone yet at a project in Guinea, but added that the average grade of all stones unearthed to date there was slightly lower than thought.

Oil producer Andes Energia (LON:AEN) lifted production at the Chachahuen block in Mendoza, Argentina, and said it continued to find positive leads there. Shares rose 0.05p to 17.8p.

Latest drilling at Galantas Gold's (LON:GAL,CVE:GAL) Omagh project in Northern Ireland has thrown up the largest accumulation of gold so far, the company revealed. The stock gleamed 0.38p, or 9.1%, to 4.5p.

MARKET PREVIEW

The FTSE 100 is set for a quiet start to the week following what can only be described a tumultuous opening three weeks of 2016 – a period in which world equity markets tipped into bear territory.

The UK benchmark share index is expected to open the session up around 36 points at 5,936.1, according to the spread betting firms.

That is nothing compared with the triple digit movements - mainly downward - we have seen recently.

“Having looked at one stage last week as if we were well on course to post three successive weekly declines in a row, as equity markets across the globe tipped into bear market territory, few could have anticipated the abrupt about turn that came about at the back end of last week,” said CMC Markets analyst Michael Hewson.

“As it is we’ve probably seen one of the worst-ever starts to a trading year, driven primarily by concerns around plunging oil prices, disappointing earnings, and slowing global growth, particularly in China and emerging markets.

“With oil prices also slipping to 13 year lows the correlation between the two has been the primary driver for some weeks now, with quite a bit of evidence that oil prices were at peak bearishness, as forward predictions for oil prices got steadily revised lower, on a daily basis.”

Overnight in Asia the markets were mainly pointing upwards with the ASX leading the way with a 1.5% rally as its energy companies, well, found a little energy.

Driving the mini-renaissance was the oil price, which was trading around US$32 a barrel for both West Texas and Brent crude – halting the 17% side seen in the past month. The driver? The snowstorms on eastern seaboard of the US.

Elsewhere in Asia, Japan’s Nikkei swung out of the red and into the black with a 0.9% gain, while Shanghai Composite had a reasonably quiet session by its recent standards with a 0.2% advance.

Here in the UK, news over the weekend pointed to the sustained slowdown of UK PLC, where the number of profit warnings issues by listed companies has spiked sharply.

The company reporting schedule is a little slower in the week coming, with Diageo, Sky and BT all slated to report.

Outside the UK, the US Federal Reserve and Bank of Japan meet later this week to decide interest rates for their respective nations.

Phil-Waller.jpg

© Proactive Investors 2016

Proactive Investor UK Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.