FTSE cancels out late Wednesday surge on bank probe and BP

The UK’s blue-chip index may have rallied to close with gains in the last session, but the growth from Wednesday’s late movement was written-off in early trading this morning after a late sell-off on the US markets, BP plunging into deeper woes, interest rate decisions and a UK probe into investment banks.

Rob Hull
shareprices.com - Thursday, June 10, 2010

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RBS could come under fire from a UK probe into investment banks

The FTSE 100 ended three successive days of decline yesterday to end the session with a 1.2 per cent gain, adding 57.71 points to close at 5,085.86.

Asian stocks rose this morning as China officially released data confirming a vastly improved export growth of 48.5 per cent in May. However, with the report leaking into the hands of news writers yesterday, the UK markets responded to the results in Wednesday’s session with the news being the main contributor to the FTSE 100’s growth.

Instead of waking to solid export growth results, investors have kicked the day off with interest rate factors on their minds. The latest interest rate decision, the first since the formation of the new Lib-Con Coalition Government, from the Bank of England is due at midday BST. However no change to monetary policy is expected.

Also playing on some investors thoughts is the impending probe by the Office of Fair Trading into investment banks.

The investigation surrounds the fees charged for equity underwriting and other services after corporate clients of investment banks voiced “some dissatisfaction” with the services they received.

The OFT plans to examine rights issues and other stock sales by all the constituents of the FTSE 350 index which make up the top 350 UK public companies.

The probe could potentially result in reinforcement action and changes to the current legislation.

The potential probe could have an effect on the share price of RBS (LON:RBS) which has been named as one of the top three banks in UK equity underwriting. RBS shares are currently flat at 10:00BST after shedding 1p in early action.

Also dropping points in the opening two hours of the session has been BP (LON:BP).

Concerns over the financial health of the group following the two-month saga of the Gulf of Mexico oil spill has been mounting recently with the stock closing below 400p yesterday for the first time since October 2008.

The shares have continued to fall today with the price at 10:00BST hitting 372.90, a 4.8 per cent decline.

BP’s share situation hasn’t been helped by sharp falls overnight in the value of BP’s American Depositary Receipts which have almost halved since April 20 and hit 14 year lows.

The effects of the spill haven’t just hampered BP either – it’s had strong repercussions for the rest of the oil sector.

Both Total and Repsol have seen drastic drops in share price on European markets since the spill and Royal Dutch Shell (LON:RDSA) shares have dropped 0.8 per cent already this morning to continue its two-month decline in price.

Another notable fallers on the FTSE 100 today is Home Retail Group (LON:HOME) which announced sales in the 13 weeks to May 29 at its two high-street chains, Homebase and Argos, fell 1.4 per cent and 8.1 per cent respectively.

The share price fell four per cent to 228.30p at 10:00BST.

The FTSE 100 index is up 0.2 per cent at 5094.26 at 10:00BST.

 

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