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The decline in giant lenders HSBC Holdings and lloyds Banking groups saw the FTSE 100 fall from recent record highs on Thursday.
The FTSE 100 index fell 39.47 points, 0.4%, to 9,509.40. The FTSE 250 rose 11 points, 0.1%, to 22,052.83 and the AIM All-Share fell 2.32 points, 0.3%, to 793.70.
HSBC, the second-most valuable company on London’s blue-chip index, returned 5.4% as analysts questioned the price paid to buy a minority stake in Hong Kong-based Hang Seng Bank.
HSBC said it offered about $19.92 a share for the 37% of Hang Seng Bank it does not already own.
City Banking analyst Andrew Combs said: “While the strategic rationale is compelling, and this appears to be a sensible overall use of capital, we expect investors to question why now and at this price.”
Shore Capital banking analyst Gary Greenwood said the acquisition multiple looks “fivefold.”
Meanwhile, Lloyds Banking Group reversed Wednesday’s gains, closing down 3.3%, after signaling it may need to make additional “material” provisions related to car finance mis-selling.
Lloyds said that “uncertainties remain over the interpretation and implementation of the proposals” and that the size of the potential provision is subject to “ongoing analysis and review”.
The update comes just two days after the Financial Conduct Authority said UK lenders would have to pay £8.2 billion in compensation payments to customers affected by car finance mis-selling, as well as £2.8 billion in administrative costs, bringing the total cost to around £11 billion.
KBW currently estimates a total loss for Lloyds of around £2 billion, compared to £1.15 billion previously taken, with the FCA’s market share analysis “suggesting 15% or £1.65 billion” of the total of £11 billion.
Close Brothers fell 13% as it also warned that the FCA’s compensation plan was likely to result in a material increase to its existing provision of £165 million.
Defense stocks also fell, with Babcock International falling 1.1% and BAE Systems falling 0.5% after Israel and Hamas agreed terms for the release of all hostages held by Hamas in Gaza, a major step toward ending the conflict.
“This could be a small attempt to take profits after a strong performance in the defense sector. Russia’s invasion of Ukraine in 2022 prompted more investors to pay attention to defense stocks and the subsequent rise in geopolitical tensions in other parts of the world led to various governments spending more money on military and intelligence capabilities,” it commented. juice moldInvestment Director at AJ Bell.
Hopes for peace in the Middle East and good results from US rival Delta Air Lines boosted British Airways owner IAG, sending it up 3.2% and to the top of the FTSE 100 leaderboard.
The US airline posted stronger-than-expected earnings last quarter and an optimistic outlook.
Advertising agency WPP and housebuilder Barrett Redrow were the major blue-chip decliners, down 5.9% and 3.6% as they traded ex-dividend.
A disappointing survey from the Royal Institution of Chartered Surveyors has further increased the pressure on housebuilders.
The RICS report showed that new buyer inquiries have declined for the third consecutive month, house prices remain negative and sentiment remains cautious on the near-term outlook.
RBC Capital Markets analyst Anthony Codling said things are unlikely to change before the budget in November.
“From a medium to long term perspective the sector looks cheap, but in the short term there is less reason to be happy,” he said.
In European shares on Thursday, the CAC 40 in Paris closed 0.2% lower while the DAX 40 in Frankfurt closed 0.1% higher.
Shares in Italian car manufacturer ferrari It fell 14% after its target for 2030 fell short of lofty forecasts.
Meanwhile, minutes of the recent European Central Bank meeting showed that all policymakers supported the move to leave rates unchanged.
“There was no immediate pressure for a change in policy rates in the current meeting,” the details said.
“The environment remains more uncertain than usual, particularly due to the still-volatile global trade policy environment, but also due to geopolitical developments. Such uncertainty could also justify keeping interest rates unchanged,” the minutes read.
Sterling went down as the dollar strengthened. At the close of London equity markets on Thursday, the pound fell to $1.3305, down from $1.3406 on Wednesday.
Stocks were lower in New York at the time of London close. The Dow Jones Industrial Average, S&P 500 index and Nasdaq Composite are all trading down 0.3%.
The yield on US 10-year Treasuries was reported at 4.15%, up from 4.12% on Wednesday. The yield on US 30-year Treasuries rose to 4.73% from 4.71%.
On Thursday, gold was trading at $ 4,020.10 an ounce, up from $ 4,044.28 an ounce on Wednesday. Brent oil was trading at $65.95 per barrel on Thursday, up from $66.40 late on Wednesday.
The biggest risers on the FTSE 100 were IAG, up 12.8p at 412.8p, Anglo American, up 63.0p at 2,963.0p, Weir Group, up 58.0p at 2,860.0p, SSE, up 32.5p at 1,817.0p and Schroders, up 399.0p. Up 6.2p.
The biggest fallers on the FTSE 100 were WPP, down 21.7p at 345.9p, HSBC, down 57.4p at 1,008.6p, Barrett Redrow, down 14.0p at 375.4p, Lloyds Banking Group, down 2.9p at 83.5p and Burberry Group, down 42.0p. were at 42.0p. 1,223.0p.
Friday’s global economic calendar sees producer price inflation data in Japan and the Michigan consumer sentiment index in the US.
Friday’s UK corporate calendar features a business description of recruitment company, Hayes.
Contributed by Alliance News