Afternoon:
9°c
Banks led the charge on the stock market this morning with Royal Bank of Scotland cutting a swathe through the bears despite reporting a record £24.1 billion loss.
Its shares climbed 4.5p to 27.6p with dealers claiming that a line has been drawn under the toxic losses and the Government-controlled bank is now focusing on cutting costs and getting its balance sheet back up to strength.
RBS was followed by Lloyds Banking Group which reports tomorrow. Its shares climbed 12.6p to 70p. The UK's biggest mortgage provider has already declared that losses from its HBOS subsidiary are expected to reach almost £11 billion. Both banks are now expected to dump between them a massive £500 billion of toxic assets into the Government's proposed asset protection scheme, which it is hoped will leave them to start with a clean sheet.
Barclays, which remains outside the Government's golden circle, also celebrated with a rise of 7.9p to 113.5p, while HSBC, reporting next week, jumped 25p to 517½p.
The move by the banks provided renewed impetus among City investors who were able to shrug off another poor performance in New York last night. But trading conditions remain thin, leading to fresh volatility among second-liners. The FTSE 100 index sported a rise of 65.42 at 3914.4.
RSA Insurance responded to its latest trading update and news of job losses with a rise of 8.6p at 134.6p. It also boosted Legal & General, up 2.9p at 37.8p, which is also shredding jobs, and Old Mutual, 2.1p better at 42.7p.
Hammerson opened 94¾p lower at 239¼p as trading began in the nil-paid at 76p. It follows the property developer's move to raise almost £600 million by way of a seven-for-five rights issue at 150p. Elsewhere in the property sector, British Land rose 17¾p to 440p, with Land Securities adding 10p to 537½p.
Both companies have turned to shareholders for extra funds in order to reduce debt and are due to go ex-rights some time next month.
Children's television producer Entertainment Rights, which owns characters like He-Man, Casper The Friendly Ghost and Postman Pat, is in advanced talks with bidders for the sale of certain parts of the business.
It says: "The offers received are at a level which would be acceptable to the board and to the group's lender, but at which there is no prospect of recovering all of the outstanding debt".
It is now clear that neither a sale nor the alternative of a bank-supported restructuring would result in any value being attributed to the company's ordinary shares.
Following Tuesday's relief rally, Wall Street investors were brought back down to earth with a thud yesterday as they were forced to digest more bad news on the US housing market.
President Barack Obama's rallying call for the economy appeared to ring a little hollow after it emerged that the recession in the US appears to be deepending. The latest numbers on the housing market showed that sales of existing homes dropped 5.3% in January to an annual rate of 4.49 million. Almost half of those sales were thought to be made up of distressed sellers. The average price of a house was down almost 15% year-on-year.
It was not the news that stock market investors wanted to hear and the Dow Jones Average finished the session down 80.05 at 7270.89.
Shares were again on the slide in Asia. In Tokyo, the market ended flat after briefly turning negative on a spate of profit-taking.
Drugmaker Daiichi Sankyo fell more than 9% after US regulators said Indian generic drugmaker Ranbaxy Laboratories, in which Daiichi holds a controlling stake, had falsified data.
The Nikkei 225 closed down just 3.29 points at 7457.93.
Hong Kong shares lost an early lead. China Mobile was sold ahead of the expiry of index futures. The benchmark Hang Seng index finished the day 110.14 points lower at 12,894.94.
