Monday February 16, 09:38 AM
Glance-Lloyds woes dent banks, weigh on FTSE
By Simon Falush
LONDON, Feb 16 (Reuters) - Renewed fears over banks weighed
on Britain's top share index which edged 0.1 percent lower early
on Monday, as Lloyds Banking Group sank further on losses from
its HBOS division while the
grim economic backdrop pressured
commodity stocks.
By 0901 GMT the FTSE 100 had fallen 1.94 points to
4,187.65, having lost 0.3 percent on Friday.
Lloyds fell 6 percent as its profit warning on
Friday revived concerns it could need more state funds or be
nationalised due to deepening problems at HBOS.
The bank (NASDAQ: TBHS - news) lost more than 32 percent on Friday after the
lender said its HBOS unit made a pre-tax loss of 8.5 billion
pounds ($12.28 billion).
'The Lloyds story is having a read across to the rest of the
banking sector,' said Richard Hunter, head of equities at
Hargreaves Lansdown (LSE: HL.L - news) . 'There are a few questions that need to be
answered. Lloyds do seem to have been sending out messages that
in normal circumstances they would have taken rather more time
to agree to the deal.
'It was their more conservative accounting outlook that
totally disagreed with the HBOS outlook which took the losses
that had been announced at 3.5 billion (pounds) in November to
nearer 10 billion (pounds) on Friday, which was the cause of
some shock and disappointment in the market.'
Barclays (LSE: BARC.L - news) , fell 1.2 percent while other financial
stocks were also on the ropes with insurer Legal & General down 10.3 percent, adding to heavy losses on Friday after
Deutsche Bank (Xetra: 514000 - news) cut its price target on the insurer saying it was
exposed to increased default assumptions on corporate bonds.
Meanwhile, domestic and international data highlighting the
harsh economic climate also added to bearish investor sentiment.
Britain will fall into a deeper economic recession than
previously thought, the Confederation of British Industry said,
as tight credit conditions and a global downturn weigh down on
companies.
Japan sunk deeper into recession with its worst quarterly
contraction in 35 years, and the dire economic outlook further
dented metals prices which hit miners.
BHP Billiton (LSE: BLT.L - news) , Kazakhmys (LSE: KAZ.L - news) and Xstrata
fell between 0.5 percent and 1.5 percent.
Rio Tinto (LSE: RIO.L - news) lost 1.2 percent after the
Anglo-Australian mining giant said it is confident the
Australian government will approve its $19.5 billion tie-up with
Chinese state-owned aluminium-maker Chinalco, Rio's strategy
chief said on Sunday.
Energy stocks also retreated with crude holding below $38
per barrel.
Royal Dutch Shell (LSE: RDSB.L - news) , BP (LSE: BP.L - news) , BG Group (LSE: BG.L - news) and Cairn
Energy fell between 0.1 percent and 0.5 percent.
Property Web site Rightmove (LSE: GB00B0MFTM73.L - news) said asking prices for
properties in England and Wales were a record 9.1 percent lower
in February than last year at an average 216,163 pounds, but
prices were 1.2 percent up on the month.
Defensive pharmaceuticals stocks were in positive territory
as investors sought safety in companies seen as well-placed to
endure the hostile economic climate.
Shire (LSE: SHP.L - news) , which reports results later this week, added
1.2 percent while AstraZeneca (LSE: AZN.L - news) gained 0.9 percent.
Over the weekend, the Group of Seven industrial powers,
fearing a 1930-style resurgence of protectionism, ended crisis
talks in Rome with a pledge to do all they could to combat
recession without distorting free trade.
Trade was set to be relatively light through Monday as the
U.S. market is closed for President's Day.
($1=.6920 Pound)
(Reporting by Simon Falush; Editing by Sharon Lindores)
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