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Investors were doing their best to look on the bright side today after the combined losses from Royal Bank of Scotland (RBS) and British Airways (BA) reached £1.79 billion during the first six months of the year.
Still, the outcome could have been a lot worse they chimed.
BA responded with a rise of 6¼p at 198¼p — making it the best blue-chip performer — while RBS, which this week was promised a further £33.5 billion of taxpayers' money, put on 0.4p at 35.6p. RBS was the heaviest traded stock on the market with 120 million shares changing hands.
The best efforts of City investors lifted the FTSE 100 index 10.49 to 5136.13, but turnover levels were pitifully thin with traders remaining cautious ahead of the non-farm payroll numbers. These showed US unemployment nudging towards 10%. Results from the world's biggest insurer AIG got the thumbs down from investors on Wall Street with the shares slipping almost 10% in early unofficial trading.
JPMorgan has some catching up to do on Barclays. It has raised its target from 220p to 280p but continues to rate the shares underweight. That compares with the current share price of 341¾p, up 9½p, which has dropped back from the 360p level in recent weeks after the sale by the Qatar sovereign wealth fund of £1.3 billion of shares. Qatar was one of several sovereign wealth funds which ploughed money into Barclays enabling it to avoid joining the Government's asset protection scheme.
Citigroup sees a brighter future for Lloyds Banking Group, 2½p better at 85½p, now that the Government has given the UK's biggest mortgage lender the go-ahead to raise £21 billion of new capital. It has raised its rating from hold to buy. Elsewhere in the sector, HSBC put on 12p to 682¼p and Standard Chartered 30p at 1600½p.
The gains among the banks helped to offset falls for the oil explorers after JPMorgan recommended that clients remain short of the sector. BP fell 6½p to 580¾p, BG Group, 8½p to 1087p, and Royal Dutch Shell 11p to 1755p.
Some of the defensive stocks which have attracted support this week also turned easier. Supermarket giant J Sainsbury fell 2½p to 332¼p, while Tesco shed 3p at 415¼p. The big drug stocks also came under the hammer with GlaxoSmithKline down 12½p at 1207½p and AstraZeneca falling 18½p at 2683p.
Among the miners, S&P Equity Research has raised its recommendation on BHP Billiton, ½p lighter at 1699½p, from hold to buy. Citigroup has a buy rating on Chilean copper miner Antofagasta as part of a review of the mid-cap miners. It points out Antofagasta, 13p higher at 853p, has underperformed its heavier debt laden rivals, such as Kazakhmys, 10p better at 1218p, during the past six months and now expects more modest gains in base metal prices. Antofagasta's low-risk production growth now makes it the best copper option next year. Citigroup goes on to warn that commodity price and earnings momentum in the sector are slowing. Its top pick is Rio Tinto, up 19½p at 2894p, driven by valuation, growth catalysts and an improving outlook for iron ore and aluminium prices.
Miners generally enjoyed a better day, with Vedanta Resources adding 1p at 2244p upon further reflection of yesterday's trading news. But Mexican miner Fresnillo shaded 6p to 835p.
Shares have begun trading on AIM in London Mining, which is developing mines for the steel industry. A total of 32.4 million existing shares were placed at 192¼p and opened at 205½p. The company owns the Marampa hematite iron ore mine in Sierra Leone, the Isua magnetite iron ore project in Greenland, and has 50% stakes in ventures in Saudi Arabia and China.
Cannacord Adams has begun coverage of Petra Diamonds, 2½p firmer at 70¾p, with a buy rating and a 120p target. Following the acquisition of the Cullinan, Kimberley Underground, Koffeifontein and Williamson diamond mines from DeBeers, the group now operates five production mines and has shed its Angolan interests.
Housebuilders continued to make progress following this week's bullish trading update from Taylor Wimpey, 1¼p firmer at 41¼p, which some brokers say may have signalled the bottom of the housing market collapse. Persimmon rose 21¼p to 435¼p, Barratt Developments put on 6p at 140p, and Bovis Homes firmed 15p at 423¼p.
