FTSE flat as banks lose ground ahead of interest rate decision
The UK’s blue-chip index is trading flat this morning with banks falling out of favour ahead of the interest rate decision from the Bank of England at midday and economy-strength-signalling job data from the US which will be released on Friday. Analysts have predicted the Bank of England will be split three ways for the first time in 10 months with support for tightening of policy as well as calls to further stimulate the faltering economy.
Kate Neilson
shareprices.com - Thursday, October 07, 2010
At 09:38GMT, the FTSE 100 is flat with a loss of less than one point as the index value remains at 5,680 after closing on Wednesday at a five month session-ending high.
Despite analysts backing the interest rate to remain unchanged at 0.5 per cent, investors will still be eyeing where the Monetary Policy Committee will be positioned and how the UK is comparing to the rest of Europe with the European Central Bank giving its latest rate decision on Thursday, too.
Nonfarm payrolls on Friday are expected to influence more market movement with expectations fairly muted as economists forecast a fall of 54,000 jobs.
In the meantime though, risk-associated banks have been subject to an investment turnaround, going from strongly in demand in the past two session to be broadly out of favour on Thursday.
The sector wasn’t helped by a release from Halifax this morning which claimed British house prices had dropped a record 3.6 per cent in September, signalling the UK economy is still fighting a losing battle to move into a position of recovery.
Lloyds Banking Group (LON:LLOY) is the biggest banking anchor, shedding 2.3 per cent of its share price.
Royal Bank of Scotland (LON:RBS) has already lost one per cent of its share price while Barclays (LON:BARC) and HSBC Holdings (LON:HSBA) are being eyed as safer stocks and remain flat.
Another release today that also hinted at future difficulties with the UK economy came from retailer Marks & Spencer (LON:MKS) in its latest corporate report. The high-street firm beat forecasts but said the outlook for trading looks tough with further austerity measures from the government likely to reduce public spending. The share price has grown 0.8 per cent as investors reacted to the strong financial figures.
Also posting strong share price improvements is broker ICAP (LON:IAP) which received an upgrade from Evolution to a “buy” rating. The share price has surged two per cent higher.
Energy and mining stocks lost much of the ground gained yesterday as crude and base metal prices weakened. Kazakhmys (LON:KAZ) is the top decliner, losing 3.7 per cent of its share price. Fellow miner Antofagasta (LON:ANTO) is 2.6 per cent down after receiving a downgrade from Citigroup to “sell” from “hold”.
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