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FTSE 100 outshone by smaller caps, banks to blame

Top UK shares ended lower on Friday, as bank stocks took fright of a $14bn settlement claim over toxic mortgages levelled against Deutsche Bank in the United States
London City skyline
FTSE 100 worse off by end of the week

 

Top UK shares ended lower on Friday, as bank stocks took fright of a $14bn settlement claim over toxic mortgages levelled against Deutsche Bank in the United States.

The blue-chip FTSE 100 closed down 0.3% at 6,710, some 66 points lower than where it began the disappointing rangebound week.

Despite no further monetary boost from the Bank of England on Thursday, the markets really were rudderless this week, with Germany’s biggest lender souring things at the end of the week.

Deutsche Bank faces a $14bn settlement claim from the US in respect of accusations it packaged toxic mortgages between 2005 and 2007. The subprime mortgage credit crisis that consumed Wall Street and interbank markets, and led to the Eurozone sovereign debt crisis, had its origins in 2007.

Among UK-listed banks, Royal Bank of Scotland (LON:RBS) was the FTSE 100’s biggest decliner of the session, down 4.4% to 185.6p, Barclays (LON:BARC) was next with a 2.8% decline to 164.7p and Asia-focused bank Standard Chartered (LON:STAN) was third with a 2.7% fall to 607.1p.

Supermarket Morrison (LON:MRW) was a top-10 gainer of 1.7% to 211.6p after analysts at Bernstein and Exane upgraded their rating for the supermarket after it reported better-than-expected results on Thursday.

Meanwhile, the mid-cap FTSE 250 index closed 0.6% higher, or 100 points, at 17,851 on Friday. But that ticker too disappointed over the week, with rangebound dealings which saw the index finish the week down 43 points.

In the FTSE 250, shares in private equity investment firm SVG Capital rose 5% to 683p after it said a 650p-a-share offer it received from US firm HarbourVest earlier in the week "undervalues the company".

Smaller stocks also outperformed the FTSE 100 index. The FTSE AIM 100 Index ended up an impressive 1.2% at 3,856 while the FTSE AIM All-Share Index ended up 0.7% at 808.

London’s gainers amounted to 36% on Friday, losers 25% and unchanged were 38%.

London’s top gainer this session was Progility (LON:PGY), which more than doubled by 106.5% to 1.6p. The AIM-listed stock which boosted the AIM tickers issued a statement saying “the Professional Services, Healthcare and Communications firm notes the increase in the Company's share price today, and can confirm it knows of no specific reason for the increase.”

The company issues its full year results in the week of Sept 26.


LUNCH

Small caps were outshining bigger stocks at lunch, with FTSE 100 down around eight at 6,715.

Banking titan RBS (LON:RBS) was still the biggest laggard, dropping 4.53% to stand at 185.4p as sector peer Deutsche Bank faces a whopping  US$14bn (£10.6bn) settlement claim from the US after an investigation into mortgage-backed securities.

Other big banks took a knock too with Barclays (LON:BARC) down 3.14% to stand at 604.6p.

Small cap shares were forging ahead though, with FTSE AIM 100 adding over 0.7% to 3,838 and the FTSE AIM All-share index up 0.47% to stand at 805.950.

Among the risers was Kibo Mining PLC (LON:KIBO), whose shares added over 9% to stand at 9p a pop as it pulled in one of the biggest names in world engineering to help construct the thermal power plant at its Mbeya project in Tanzania.

US giant General Electric has signed a memorandum of understanding to supply equipment, technology and its help to bring the project to a financial close.

Oiler Chariot Oil & Gas plc (LON:CHAR) was also sailing, with shares up 17.42% to 7.75p.

It’s been  a good week for the group, which this week posted interims, which told investors of its drilling plans and said it had more than enough cash to fulfil its licence commitments.

Larry Bottomley, chief executive of Chariot, told investors: "Our technical work over the last few years has laid the foundations of a strong company with a portfolio of assets capable of delivering transformational growth.

"The next phase across our portfolio is to create value with the drill bit and our aim is to partner with a target of drilling three wells within the next two years."

Braveheart Investment Group PLC (LON:BRH) added 7.76% to 15.63p as it completed the sale of the 1.25% interest and the 3.75% interest held by Strathclyde Innovation Fund, in which it has a 89.3% interest, in mLED Limited to a large US based technology company.

 

 


 

London's blue chip index was on the back foot with bank shares lagging after the Deutsche news and as investors look to US data later and an EU summit in Bratislava, which is not being attended by the UK.

FTSE 100 is down 14 at the time of writing at 6,715, but notably the FTSE 250, more focused on UK domestic  companies, is up over 47 points at 17, 799.

In small caps, things were also more buoyant, with FTSE AIM 100 up 0.67% to 3,836 and the FTSE AIM All share up 0.45% to stand at 805.750.

On Footsie, banks were taking a hit, after news the US is asking peer Deutsche Bank to pay US$14bn (£10.6bn) in a civil claim to settle an investigation into mortgage-backed securities.

Traders are also worried over the global economic outlook, what the US Fed will do on rates and Brexit fears linked to the furture of banking in the City of London.

RBS (LON:RBS)  was the down 3.5% at 187.4p, while Asia focused Standard Chartered (LON:STAN) shed 2.88% to 606.2p. Barclays (LON:BARC)  shares were also lower.

Accendo Markets said of the Deutsche news: "This is never good news for a sector so intricately linked, especially when aimed at making an example of Europe’s largest (it’s almost equivalent to its market cap!), suggesting that an end to all those years of litigation is a way off yet."

It added: "RBS is suffering most today because it remains in the firing line stateside for its own RMBS mis-selling and actions in the run-up to the financial crisis."

In small caps, among the risers was Eco-Animal Health Group plc (LON:EAH), which gained over 13% to 497.5p as it told an AGM trading this year had started well and the first five months saw sales significantly ahead of the same period last year.

Following the weakening of sterling post the leave vote, it is anticipated that some foreign exchange benefits will enhance earnings, it added.

Kibo Mining PLC (LON:KIBO) shares were up over 12% to 9.25p in early deals as it pulled in one of the biggest names in world engineering to help construct the thermal power plant at its Mbeya project in Tanzania.

US giant General Electric has signed a memorandum of understanding to supply equipment, technology and its help to bring the project to a financial close.

Hurricane Energy (LON:HUR) added over 7% to 40p.

Yesterday, Sam Wahab at broker Cantor Fitzgerald suggested oil giant BP PLC (LON:BP.) would make a good partner for Hurricane Energy PLC on its Lancaster field in the North Sea.

The analyst has just increased his target price for the oil and gas independent to 69p per share from 26p after a hugely successful test well at Lancaster last week.

Lancaster is now likely to hold significantly more than the 207mln barrel 2C case reported in its last competent persons report.

Talking to Proactive, Wahab said Hurricane (LON:HUR) made a very sensible decision in drilling the pilot well and keeping its stake in Lancaster at 100%.


Opening snapshot at 8.15am

The FTSE 100 opened 20 points lower this morning at 6,709.

The biggest winner was luxury fashion house Burberry Group (LON:BRBY) up more than 1% to 1,275p. 

Royal Bank of Scotland Group (LON:RBS), down almost 4% to 186p.

News

Avanti Communications buyer talks continue

Punters snap up Gulf Keystone's open offer

Scancell wants to take more discoveries into the clinic


Preview at 6.58am

FTSE 100 is called to open a shade lower as the week ends as traders are unsure which way central bankers will go next week.

The US Fed and Bank of Japan have policy meets next week, and investors will of course be wondering what happens with interest rates. There has been largely a mood that Janet Yellen and her team would lift rates as the US economy grows but that sentiment has been quashed in some quarters recently.

In the UK, as expected, the Bank of England kept rates on 'hold' yesterday but there are noises suggesting they could be cut further in the autumn.

Michel Hewson, at CMC Markets,  suggested the contrast between the US and UK could not be greater... "with the US Federal Reserve trying to be too hawkish for its own good, and hastening a possible recession, while the Bank of England seems to be intent on looking for evidence of problems behind every corner, in its determination to offset one".

"This uncertainty about central bank policy action and its declining effectiveness which has been a hallmark of this week’s price action and choppiness is likely to leak into next week as well ahead of the Bank of Japan and US Fed rate meetings next Wednesday."

FTSE 100 finished 56 higher or 0.85% to 6.730 on Thursday and is called by IG index to open around five points below that.

The big news of the day was the government go-ahead to the huge Hinkley point nuclear scheme.

In the US, shares closed sharply higher, buoyed by Apple (NASDAQ:AAPL) and its suppliers, as its iPhone 7 smartphone was sold out ahead of hitting shelves in Asia across Appole stores. Apple shares gained 12% on the day.

The Dow Jones finished 0.99% higher at 18,212 and the S&P 500 gained 1.01% and the Nasdaq added 1.47% to 5,249.

In Asia, the Nikkei 225 in Japan is up 0.54% to 16,492, while the Chinese Shanghai Composite Index is 0.68% lower to 3,002.

CITY HEADLINES

'EU row over deal to save steel' - Telegraph

'PPI compensation is still the biggest cause for complaints against banks' - Telegraph

'Deutsche Bank must pay $14bn fine to settle US mortgage case' - the Guardian

'We'll protect vital firms from foreign predators: Ministers pledge as Hinkley Point is finally approved' - Thisismoney


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