February 28, 2011 / 9:44 AM / 7 years ago

FTSE down, banks hit after HSBC results

LONDON (Reuters) - Britain's FTSE 100 .FTSE share index fell on Monday as disappointing results from HSBC (HSBA.L) and Associated British Foods (ABF.L) and geopolitical concerns knocked investor sentiment.

By 1140 GMT, the FTSE 100 was down 19.34 points, or 0.3 percent, at 5,981.86, after it closed 1.4 percent higher on Friday at 6,001.20, bouncing back after five straight days of declines.

Banks were the biggest drag on London’s blue chip index, with heavyweight HSBC down 4.5 percent after its earnings missed estimates.

Lloyds Banking Group (LLOY.L), whose margin outlook disappointed the market on Friday, fell 0.9 percent, as brokers responded by cutting ratings and target prices for the majority state-owned UK bank.

Political troubles hampered broader market sentiment, as protests in Oman fueled concerns about oil supplies from the Middle East after uprisings in Libya dramatically reduced exports from North Africa.

“The Middle East situation has reminded investors of the risks that remain in the developing world,” Colin Lunnon, fund manager at Octopus Investments, said.

“We have been content to direct recent new money inflows to cash for the time being until a clearer picture presents itself and some tangible trends begin to emerge.”


Miners .FTNMX1770 remain under pressure as oil prices threaten the global economic recovery.

Chinese Premier Wen Jiabao said over the weekend that fighting inflation was a priority for China even as the official GDP target for the 2011-2015 growth plan is 7 percent per year, down from the 11.2 percent a year growth China averaged in the last five-year period.

Bucking the overall trend Essar Energy ESSR.L rose 3.8 percent as Credit Suisse initiated coverage of the Indian-focused oil and gas business with an “overweight” rating.

Credit Suisse says Essar has a strong growth outlook, offering investors an attractive play on the Indian power market.

But a slowdown at discount fashion retailer Primark’s British stores hit the shares of owner Associated British Foods Plc (ABF.L).

AB Foods fell 5.5 percent as it said tax rises and inflation squeezed consumer spending in the first two months of this year.

The results dented confidence in the retail sector, with Wm Morrison Supermarkets (MRW.L) down 2 percent and Next off 2.3 percent.

“With more gloomy news from Primark today on High Street trading, we remain cautious in the short term about the general retail sector,” Nick Bubb, analyst at Arden Partners said.

Elsewhere, Pearson (PSON.L) added 1.7 percent as the publisher reported “robust” full-year results, leading Numis Securities to raise its target price.

UK real estate firms Hammerson (HMSO.L), British Land (BLND.L) and Land Securities (LAND.L) rose 2.2 to 2.2 percent.

Traders cited bullish views on land values and an upsurge in residential developments in London and other parts of the UK, after an article in the Financial Times.

Editing by Greg Mahlich

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