London midday: Banks rise, retailers drop, BoE maintains rate

12th Jan 2012 11:58

After a subdued start, the Footsie seems to have found its direction, trading up near the 5,700 level, helped by the latest Italian and Spanish debt auctions which saw solid demand and a fall in yields.Italy has sold a total of €12bn in bills, with yields on its 12-month debt falling to 2.74% from 5.95%. Spain has sold almost €10bn in debt, double the target amount. Yields on the April 2016 bonds on offer fell to 3.75%, from 4.87% before.Meanwhile, as expected, the Monetary Policy Committee of the Bank of England maintained its policy decision from last month with the Bank Rate being held at 0.5% and asset purchases at £275bn. However, Barclays Capital analyst Blerina Uruci said: "We believe there remains a strong bias to loosen policy...and expect the committee to announce a further expansion of asset purchases in February." The European Central Bank is expected to keep rates at 1% but markets are looking ahead to the press conference with central bank President Mario Draghi later today for any tell-tale signs about future decisions.In London, the strong performance by banks has helped to outweigh a plunge in the retail sector. MARKETS CELEBRATE AS RBS CUTS JOBS As expected, part-nationalised lender Royal Bank of Scotland (RBS) has revealed a massive shake-up to its investment banking and wholesale businesses, including a mass employment reduction of 3,500. The group's Chief Executive Stephen Hester said: "Our goal from these changes is to be more focussed for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall. Shares jumped 9%, with sector peers Lloyds and Barclays not too far behind. Banking titan HSBC climbed by a lesser 1% after Bank of America Merrill Lynch downgraded the stock from neutral to underperform, citing high costs and its Chinese exposure as risks.DISAPPOINTMENT FOR UK RETAILERS A big mover early on Tesco, with 'must do better' being the theme of its Christmas trading statement. Shares tumbled nearly 10% after the UK's leading supermarket chain saw sales performance in its home market fall below expectations, prompting the company to advise full-year trading profit growth will be around the low end of the range of analysts' expectations. Sector peers Sainsbury, Morrison and Marks & Spencer fell back in sympathy. Car and bike parts retailer Halfords has seen the fall in retail sales accelerate in the third quarter, which it blames on the mild weather. As such, the UK and Republic of Ireland gross margin is expected to fall by 130-150 basis points on a full-year basis. Home Retail Group has reported weak Christmas sales for Argos but says Homebase has been more resilient. The crucial like-for-like (LFL) sales figure for Argos was down a worrying 8.8% in the 18 weeks to the end of December. Over the last 44 weeks like-for-like sales have fallen 8.9%. Shares in chocolate retailer Thorntons soured after it reported a weaker than expected 0.6% rise in total sales over the important Christmas trading period. Bucking the trend was online grocer Ocado, which surged over a quarter after enjoying a festive surge in sales. Gross sales in the seven trading days to Christmas rose 23.8% year-on-year. Cash and carry operator Booker was also firmer after like-for-like (LFL) sales increased by 6.7% in the 16 weeks to December 30th.In other company news...Emerging markets asset manager Ashmore rose after seeing assets under management (AUM) rise by 2.5% in the final quarter of 2011, driven by a mixture of net inflows and positive investment performance.Consumer goods firm Reckitt Benckiser suffered a downgrade from JP Morgan Cazenove which cut its rating from overweight to neutral. Pay-TV and internet service provider BSkyB has been downgraded by UBS and Investec, with both brokers citing an uncertain outlook as the reason for the ratings cut. WPP was upgraded by UBS from neutral to buy.BCFTSE 100 - RisersRoyal Bank of Scotland Group (RBS) 23.62p +8.40%Vedanta Resources (VED) 1,084.00p +6.69%Man Group (EMG) 110.70p +5.93%Ashmore Group (ASHM) 343.00p +5.25%Lloyds Banking Group (LLOY) 29.62p +5.15%Aviva (AV.) 328.20p +4.09%Kazakhmys (KAZ) 1,068.00p +4.09%Barclays (BARC) 198.05p +4.07%Eurasian Natural Resources Corp. (ENRC) 749.00p +3.96%RSA Insurance Group (RSA) 113.10p +3.48%FTSE 100 - FallersTesco (TSCO) 334.50p -13.12%Morrison (Wm) Supermarkets (MRW) 286.50p -5.76%Sainsbury (J) (SBRY) 286.90p -5.03%Royal Dutch Shell 'B' (RDSB) 2,359.00p -2.26%Royal Dutch Shell 'A' (RDSA) 2,279.50p -2.06%British Sky Broadcasting Group (BSY) 695.50p -1.77%Marks & Spencer Group (MKS) 316.50p -1.74%Kingfisher (KGF) 252.00p -1.37%Tate & Lyle (TATE) 698.00p -1.20%Unilever (ULVR) 2,062.00p -1.06%FTSE 250 - RisersOcado Group (OCDO) 72.60p +30.93%SIG (SHI) 100.10p +9.28%Moneysupermarket.com Group (MONY) 117.00p +7.04%Cape (CIU) 386.10p +6.95%Barratt Developments (BDEV) 103.70p +6.91%Provident Financial (PFG) 1,000.00p +5.32%Invensys (ISYS) 225.00p +4.41%Intermediate Capital Group (ICP) 248.40p +4.06%Ferrexpo (FXPO) 310.10p +3.99%Daejan Holdings (DJAN) 2,808.00p +3.62%FTSE 250 - FallersHome Retail Group (HOME) 83.10p -4.76%Micro Focus International (MCRO) 420.00p -2.86%Dairy Crest Group (DCG) 320.10p -2.65%Howden Joinery Group (HWDN) 103.50p -2.45%Fidessa Group (FDSA) 1,600.00p -1.96%Exillon Energy (EXI) 279.50p -1.93%FirstGroup (FGP) 320.20p -1.93%RPC Group (RPC) 382.00p -1.52%Salamander Energy (SMDR) 224.80p -1.45%Interserve (IRV) 308.40p -1.44%