Trade Deficit Increase Surprises Market

Trading was light on the London Stock Exchange on Tuesday morning, but figures from the Office for National Statistics (ONS) revealed, surprisingly, that Britain's trade deficit increased to £7.99 billion in January, compared with £7.01 billion in the previous month, putting pressure on Sterling. Exports dropped by £1.4 billion, or 6.9%, to £19.5 billion and imports by £0.5 billion, or 1.6%, to £24.7 billion, contributing to the largest deficit since August 2008.

Dominic Turner
shareprices.com - Tuesday, March 09, 2010

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Royal Bank of Scotland Group

International ratings agency, Fitch Inc., said that Britain's sovereign credit profile had worsened – adding that it was ""uncomfortable with the fiscal adjustment path set out by UK authorities" – but was still worthy of a triple A rating. Sterling, nevertheless, fell against both the US dollar and the euro, trading at $1.4962 and €1.1017.

Shortly after midday, the FTSE 100 index was down 35.81 points, or 0.7%, at 5,570.94, with banking and mining stocks on the back foot. Moody's Investors Services and Credit Suisse both issued cautious notes on British banks – Moody's, in particular, warning that ratings may be cut as government supports for the industry is withdrawn – and all the major banks suffered as a result.

Standard Chartered was the worst affected, down 55.5p, or 3.12%, at 1,720.5p, but was joined in the doldrums by the part-nationalised lenders Royal Bank of Scotland, down 1.07p, or 2.71%, at 38.4p and Lloyds Banking Group, down 1.09p, or 2.03%, at 52.56p, while HSBC and Barclays also traded lower, down 11.1p, or 1.57%, to 694.7p and 4.3p, or 1.25%, to 340.7p, respectively.

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