Wednesday June 18, 10:33 AM
London shares remain down midmorning after BoE minutes; banks, real estate weigh
LONDON (Thomson Financial) - UK blue chips remained under pressure midmorning after the Bank of England's minutes revealed an as expected 8-1 vote to keep interest rates unchanged at the last meeting, while the banking, real estate and leisure sectors all weighed following downbeat broker reports.
At 10:06 a.m., the FTSE 100 index was down 55.4 points at 5,806.5, while the FTSE 250 (news) index lost 115.6 at 9,608.3.
Rate-setters at the Bank of England considered lifting borrowing costs at its last meeting on June 5 but ongoing fears about the outlook for the UK economy stayed their hand.
The minutes to the meeting, published this morning, showed that eight of the nine members of the Monetary Policy Committee voted to keep Bank Rate unchanged at 5.00 percent, with arch-dove Danny Blanchflower pushing for a quarter point reduction given his mounting fears of a UK recession.
Among equity movers, banking plays were under the cosh after Goldman Sachs (NYSE: GS - news) -- despite posting a tamer-than-expected 11 percent decline in quarterly profit -- last night aggravated jitters by releasing a downbeat report on the broader banking industry.
The report estimated that credit losses from deterioration in the mortgage and lending markets will not peak until early 2009 and that U.S. banks will need to raise an additional $65 billion in capital.
Barclays (LSE: BARC.L - news) lost 5-1/4 pence at 335-1/4, Royal Bank of Scotland (LSE: 91ID.L - news) was down 6-1/4 at 235 and Lloyds TSB was 6-3/4 lower at 349-1/2.
Real (Frankfurt: BJU.F - news) estate firms also felt the heat in morning deals after Credit Suisse downgraded the UK sector to 'underweight' from 'overweight' and cut Land Securities Group to 'neutral' from 'outperform', Great Portland Estates (LSE: GPOR.L - news) to 'underperform' from 'neutral' and Segro (LSE: SGRO.L - news) to 'neutral' from 'underweight'.
The broker simultaneously upgraded Hammerson and Liberty International to 'outperform' and 'neutral', respectively.
Land Securities (LSE: LAND.L - news) dropped 46 pence to 1,339, Hammerson dipped 8 lower to 910-1/2, Liberty (LSE: LBE.L - news) was off 2-1/2 at 886-1/2 and blue-chip peer British Land (LSE: BLND.L - news) eased 23 at 770.
On the second line, Great Portland fell back 16-3/4 at 353-1/2, while Segro slipped 17-1/2 at 401-1/2.
And housebuilders were down in the dumps too, with Persimmon (LSE: PSN.L - news) , which is due to leave the FTSE 100 later this week, leading the index casualties, with a fall of 25 pence to 388.
Mid-cap housebuilders followed suit, with Redrow (LSE: RDW.L - news) down 22 at 145, Barratt Developments (LSE: BDEV.L - news) 8-1/2 behind at 82 and Bovis Homes sliding 27-1/4 at 350.
Bearish moves from ABN Amro (Amsterdam: ABAGB.AS - news) also impacted the travel and leisure sectors, with Carnival (NYSE: CCL - news) , Enterprise Inns (LSE: ETI.L - news) , and mid-cap Marston's all downgraded to 'hold' from 'buy' and JD Wetherspoon cut to 'sell' from 'hold', reflecting the heightened risk of a serious economic downturn in 2009-2010.
Carnival eased 43 at 1,734, Enterprise lost 21-1/2 at 421-1/2 on the FTSE 100, while on the FTSE 250, Marston's was down 6-3/4 at 203-1/4 and Wetherspoon was 7-1/2 lower at 230-1/2.
The same broker upgraded Rank Group (LSE: RNK.L - news) to 'hold' from 'sell' but the stock was dragged down with the sector, shedding 0-1/2 penny at 79-3/4.
Broker changes apart, on the earnings front J Sainsbury slipped 7 lower at 329 as first quarter sales figures failed to excite and the supermarkets group said it sees no let up in tough trading conditions.
For the 12 weeks to June 14, the retailer's like-for-like sales, excluding fuel, increased 3.4 percent -- a touch lower than many brokers' expectations.
Peer Tesco was down 7 at 386 and WM Morrison was 4 weaker at 273-3/4.
Among only a handful of blue-chip gainers, Smith & Nephew benefited from a UBS (Virt-X: UBSN.VX - news) upgrade to 'buy' from 'neutral' on valuation grounds, while Carphone Warehouse (LSE: CPW.L - news) added 0-1/2 at 220 after Merrill Lynch (NYSE: MER - news) upgraded the mobile phone retailer, also to 'buy' from 'neutral'.
Returning to the second line, away from housebuilders and leisure stocks, Informa (LSE: INF.L - news) dropped 36 at 434 after United Business Media (LSE: UBM.L - news) said late Tuesday merger talks between the company have ended. UBM shares outperformed, unchanged at 601-1/2.
And finally, among mid-cap risers, Misys (LSE: MSY.L - news) took on 5 at 169-1/2 after the UK banking-to-healthcare software group posted a positive trading update that beat expectations for revenue and operating profit, prompting Cazenove to reiterate its 'outperform' rating.
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