London midday: Footsie laid low by Unicredit, rumours of French downgrade?

21st Dec 2011 11:39

The banks were providing a lift at midday, but the Footsie was registering only slight gains with only a few days before Christmas. Hopes of a 'Santa rally' seem to have been dampened towards midday by the suspension from trading of shares of Unicredit 'limit-down'. They have since resumed trading and appear to have stabilised a bit, allowing the London equity benchmark to bounce back into the blue, even if only just. The are also said to be rumours of a French downgrade making the rounds. Worth noting, the top share index is still trading under levels seen earlier this month. Investors do not seem to be too fazed by credit ratings agency Moody's saying Britain's cherished triple-AAA credit rating could be under threat if the Eurozone crisis worsens. Moody's Investors Service said last night: "Any additional weakening in the macro-economic outlook or a need to support the banking system could temporarily set back the government's fiscal consolidation efforts. As a result, the outlook on the rating is likely to be sensitive to future developments in the euro area's debt crisis, even though the UK is not a member of the monetary union." The Bank of England's Monetary Policy Committee (MPC) voted 9-0 to keep interest rates at record lows at its December meeting. The minutes of the meeting also show some members mulled over a further expansion of the Bank's £275bn asset purchase programme, but only "in due course". They voiced concerns about rising unemployment and increased worries about the supply of credit due to continuing strains in bank funding markets. With company announcements few and far between today, the big news was European banks asking to borrow €489bn from the European Central Bank's new three-year loan facility. This is significantly ahead of reported market forecasts of €293bn. A total of 523 banks made loan applications. They will receive the money tomorrow. European markets interpretation of the auction has been clearly positive as the operation will increase the liquidity made available to the banks, which may then use the funds to purchase sovereign debt with an attractive carry-trade. UK BANKS RISE, RETAILERS SLUMPLloyds, Royal Bank of Scotland and Barclays were performing well by lunchtime, rising at least 3% each. Old Mutual, the savings and investment group, rose 2.2% after saying it had agreed terms to sell the Finnish branch of Skandia Life Assurance Company to insurer OP-Pohjola osk. The transaction is part of Old Mutual's plan to streamline its business, with net proceeds after tax going to reduce the group's debt. Global banking giant HSBC was in demand after saying it is to offload its private banking business in Japan to Credit Suisse for an undisclosed sum. HSBC said that this deal is in line with its global restructuring strategy outlined back in May that will see 30,000 jobs go. The "Strategy Execution Plan" targeted cost savings of $2.5-3.5bn in order to reach the cost efficiency ratio target of 48-52% by 2013. Retailers Tesco, Marks & Spencer and Sainsbury were among the worst performers on the Footsie after the GfK NOP UK consumer confidence index fell to its lowest level since February 2009. The index decreased to -33 points in December from -31 the month before. The market consensus had been expecting a small up-tick to -31. Hardy Underwriting jumped after Beazley said it is interested in acquiring its Lloyd's of London underwriting rival. While Beazley has reassured that this does not represent a firm intention to make an offer, it did confirm its interest in "entering into exploratory discussions" with Hardy. SMALL CAP MOVERSA big mover was chocolatier Thorntons which warned its full year profits will miss expectations as consumers continue to cut back and it battles high levels of promotional activity on the high street. Brokers Investec and Merchant Securities hinted that this news may put the level of its dividend at risk.Hutchison China Meditech rocketed with its MediPharma business entered into a global licensing, co-development, and commercialisation agreement with sector giant AstraZeneca fir a cancer treatment drug. Astra edged higher.Heading the other way was upmarket travel operator Travelzest which said it has pulled out of bid discussions with Red Label Vacations, as the Canadian company's valuation of Travelzest did not meet the UK company's expectations. 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