FTSE 100 Friday close: Rally pulled back by miners and banks

1st November 2013

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The recent run enjoyed by the FTSE 100 stagnated this week as banks and miners put the breaks on progress.

The UK’s benchmark index closed on Friday at 6,734.74, up just 3.31 points, or 0.05% on the day, and a mere 0.2% better over the week.

On Friday, Royal Bank of Scotland, one of the week’s steepest blue-chip fallers after sliding 8% to 340p, announced plans to ring-fence billions of pounds worth of toxic assets into a so-called internal bad bank.

The news came on the back of RBS announcing a third-quarter loss of £634m, significantly below city analysts’ predictions of a £440m profit according to the Financial Times. The 81% taxpayer owned bank said it plans to switch £38bn of its riskiest loans into an internally managed bad bank, with the intention closing down the book over the coming three years.

Lloyds announced it had recorded profits for the nine months to the end of September of £1.69bn but this was overshadowed by the news that the 33% taxpayer owned bank, down 3% at 77.72p, had thrown in another £750m to cover its potential compensation bill to customers who were mis-sold so-called payment protection insurance (PPI), bringing its total put aside to £8bn.

On Friday, news emerged that Barclays, 4% lighter at 256.3p, had suspended six traders as part of a probe into allegations that currency markets could have been rigged, according to the BBC. The BBC’s chief economics correspondent, Hugh Pym, said there was no suggestion of wrongdoing. The City watchdog, the Financial Conduct Authority said the investigation was at an early stage,

Elsewhere HSBC, updating the market with its third quarter results next week, managed to firm 1% to 687.3p while its Asian market competitor Standard Chartered lost 1% at 1,505.5p.

Aircraft parts supplier Meggitt endured the steepest fall over the week, down 9% at 509p after it reduced its full-year revenue guidance after several setbacks including production problems in the United States, according to Reuters. Among the miners Fresnillo was off 8% at 957.5p, while Antofagasta dropped 4% to 837p and Randgold Resources slipped 3% at 4,507p.

Oil giant BP, was the week’s highest climber on the FTSE 100, jumping 7% to 484.75p, after delivering a more positive set of results this week, which saw it increase its quarterly dividend on the back of a recovering outlook. The firm has been on a path of recovery ever since its Deepwater Horizon oil spill in the Gulf of Mexico three years ago. In its third quarter results it announced net profits were down by almost 34% from last year at $3.5bn, primarily as a result of a decline of refining margins. Total production for the quarter was 2.207m barrels of oil equivalent per day, down 2.3% from the same time-period in 2012. Operating cash flow was $6.3bn.

But Helal Miah, investment research analyst at the stockbroker believes that BP is in the realms of transforming itself. He says: “The company remains on track to meet operating cash flow targets. Capital expenditure will remain in the region of $24 – 25bn for 2014 and investors will be pleased that the quarterly dividend has been raised.”

The UK’s’ second-biggest high street clothing retailer, Next enjoyed a 5% rise to 5,475p after telling the market that it anticipates profits to increase by as much as 9.4% after sales grew better than forecast in the third quarter of the year while traders welcomed BT Group reporting second-quarter profit ahead of expectations, pushing the shares 5% higher to 378.6p over the week.

Next week investors will be closely watching market updates from Imperial Tobacco, Marks & Spencer, Rolls Royce and Mondi.

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