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Markets Wednesday: FTSE fails to hold gains

Created:

16 July 2008

Written by:

Jonathan Eley

London equities failed to hold early gains on Wednesday, as a timid rally in financial stocks quickly faded. Having initially risen, by midmorning the FTSE100 was 8 points lower to 5,165.1, after closing at its lowest level since October 2005 after the previous session. Mining stocks offered their support to limit wider losses.

Banks gave up their initial gains to trade sharply lower. Royal Bank of Scotland fell 6.6 per cent to 156p. HBOS lost 6.4 per cent to 242.9p and Barclays was 3.7 per cent lower at 250.9p.

Miners fared better. BHP Billiton was 1.9 per cent higher at £16.95, its bid target Rio Tinto was 2 per cent stronger at £53.23 and Anglo American rose 1.3 per cent to £28.49.

Easing crude prices offered a measure of hope of easing inflationary pressure. As European equities trading started, oil stayed under the $140 a barrel mark at $138.35. That helped heavy fuel user British Airways, 1.8 per cent higher to 215p.

Mid-cap pub operator JD Wetherspoon, up 2.3 per cent at 178.8p, offered its embattled peers a measure of hope after it beat bearish forecasts to report a 0.4 per cent rise in fourth quarter like-for-like sales.

On the downside, Wolseley fell 2.5 per cent to 283p after it reported a 28 per cent fall in trading profit in the last 11 months. The supplier of plumbing and heating goods, highly exposed to the torrid US housing market, said it would not pay a final dividend as it retained capital to meet the requirements of its banking covenants.

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MARKET DATA

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OVERSEAS MARKETS

Overnight in New York, the Dow Jones Industrial Average closed below 11,000 for the first time since February 2006, 0.8 per cent to 10,961.80 points, as fears about the financial sector lingered and news that the SEC planned to limit short-selling attracted attention. Asian equities made tentative gains as investors bet the previous session’s sharp sell off left room for improvement even against the gloomier economic backdrop. In Hong Kong, the Hang Seng rose 0.7 per cent to 21,325.02

COMMODITIES

Gold pushed towards the key $1,000-a-troy-ounce level on Tuesday amid a widespread sell-off in stock markets and mounting concerns over the health of the global financial system. However, oil prices fell sharply as the recent pattern of highly volatile trading in thin market conditions continued. Nymex August West Texas Intermediate closed $6.44 lower at $138.74 a barrel. Base metals retreated amid rising levels of risk aversion. Zinc was the worst hit, sinking 8 per cent to $1,845 a tonne.

FOREIGN EXCHANGE

A dollar sell-off swept the currency to a record low against the euro on Tuesday as fears grew for the brittle US financial sector. The euro punched through $1.60 to set a record of $1.6038, before lower oil prices pushed the single currency back to $1.5893, down 0.1 per cent on the day. The dollar's weakness was more pronounced against the low-yielding yen and Swiss franc, which were boosted by intense risk aversion. Sterling pushed back through $2 to hit its highest level since March after UK consumer inflation outstripped market expectations.

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