Pressure on Banks Drags FTSE 100 into the Red

There was good news for the services sector in the U.K. on Wednesday morning with the revelation that the Purchasing Managers' Service Sector Index – prepared by the Chartered Institute of Purchasing and Supply, and Markit – rose to 51.7 in May compared with 48.7 in April.

Michael Parker
shareprices.com - Wednesday, June 03, 2009

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A figure above 50 signifies expansion rather than contraction in business activity, and the latest rise was unexpected. However, with eight FTSE 100 constituent companies going ex-dividend on Wednesday and weakness in the banking sector, the blue chip index failed to sustain recent gains and, by midday, was down 89 points or 2%, at 4,387.79.

Banks were the worst sufferers, with Barclays down 5.2%, compounding a loss of 13.5% on Tuesday after the International Petroleum Investment Company (IPIC) owned by the government of Abu Dhabi cashed in its 11% stake in the bank. Share prices in Lloyds Banking Group also fell 4.5% to 66.4p, making it one of the biggest fallers in the sector, while persistent rumours that the Saudi conglomerate, Saad Group, is looking to sell down its stake in HSBC forced the share price down 3.5%.

Other losers included insurance company Amlin, whose share price fell 5.6% to 320p, on the announcement that it is to pay the Dutch government €350 (£300 million) for the corporate insurance business of failed bank Fortis. The deal will be funded from existing cash reserves, plus a placement of 23.5 million new shares worth a total of £6.6 million.

 

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