U.S. Banking Proposals Weaken FTSE

News that the Chinese economy expanded by 10.9% in the fourth quarter of 2009 and by 8.7% in the year as a whole exacerbated fears of tighter fiscal policy on Thursday and investors also awaited a speech by President Barack Obama, in which he would announce proposals for restrictions on the U.S. banking sector, due later in the day. Leading shares tumbled on Thursday afternoon and the FTSE 100 closed down 86 points or 1.6% at 5,335.10.

Dominic Turner
shareprices.com - Thursday, January 21, 2010

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Commodity stocks remained friendless as the outlook for demand from China worsened. Miner Anglo American down 6.2% to 2,448p was the worst performer in the sector, but Kazakhyms down 6% to 1,280p was a close second, while Australian miners Rio Tinto and BHP Billiton were also down by 5% and 3.1% to 3,924.5p and 1,942.5p respectively.

The prospect of restrictions on proprietary trading and the owning of, or investment in, hedge funds and private equity funds put U.S. banks firmly on the back foot and this was reflected by their UK counterparts. Royal Bank of Scotland (RBS) was the worst sufferer, down 7.1% to 35.32p, but was closely followed by Barclays down 5.9% to 283p, Lloyds Banking Group down 5.7% to 53.3p and Standard Chartered down 5.2% to 1,430p. Barclays' share price, in particular, has come under pressure since Tuesday – when its target price was lowered to 350p from 400p by Credit Suisse – closing down 2%, down 3.6% and down 5.9% in three consecutive sessions.

 

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