LONDON MARKETS: Lloyds Banking Group Slides While Broader U.K. Market Rises
January 20 2009 - 7:03AM
Dow Jones News
By Sarah Turner
Lloyds Banking Group on Tuesday became the latest British bank
to see its share price plunge, with shares in the lender at one
point trading down as much as 48% in London's top share index.
Lloyds Banking Group (LYG) shares were recently down 25.5% at 48
pence. At one point in the session, the shares fell as low as 34
pence, a drop of approximately 48% from Monday's 65 pence closing
price.
"The market is betting that further banking nationalizations
will be necessary," said Manoj Ladwa, senior trader at ETX
Capital.
The British government currently holds 43% of Lloyds Banking
Group.
On Monday, Royal Bank of Scotland shares slumped more than 60%
after it revealed that it could be on track to post the biggest
annual loss in U.K. corporate history and that the U.K. government
would take a bigger stake in the lender.
RBS shares recovered slightly on Tuesday, up 12.1%.
"The financial sector is on government life support," noted
Richard Batty, investment director for strategy at Standard Life
Investments.
Lenders that the government does not hold stakes in were also
were declining on Tuesday, with Barclays (BCS) down 8.1% and HSBC
Holdings (HBC) down 1.3%.
"The question that investors are grappling with is what's going
to happen to the economy given the importance of the financial
sector. We see a severe recession," said Batty at Standard
Life.
Sterling plunged against the dollar on Tuesday, down 3.2% at
$1.3925, a six-year low.
Banking sector losses aside, the U.K. FTSE 100 index rose 0.7%,
or 30.42 points, to 4,138.48. Other European shares were mixed,
while U.S. stock futures traded lower.
On Tuesday, Barack Obama takes power as the 44th U.S. president
and his inauguration speech is expected to lay out an agenda for
change in troubled times.
"We already have details of the $825 billion fiscal stimulus
package. On some estimates the package will raise GDP by around 3%
to 4% over the next couple of years and save or create around 3.5
million jobs. Success will crucially depend on the bank lending
channel," noted economists at UBS.
Mineral extractors up, some retail relief
Mineral extractors advanced in London, with Anglo American
shares up 2% and Vedanta Resources shares up 2.2%
Oil producers were also performing well, with Royal Dutch Shell
(RDSA) shares up 2.2%. .
Engineering firm Invensys was among the losers, with shares down
7.4%.
The group said that its second-half results benefited from
currency translation effects against sterling and will be broadly
in line with the first-half.
In the retail sector, Burberry Group shares jumped 10.6%.
It said that its revenue in the three months to Dec. 31 rose
30%, boosted by currency moves, which was about 14% above Merrill
Lynch expectations.
The firm said that markets were challenging and volatile in the
period. It's aiming cut costs further and plans to restructure its
Spanish operations and consolidate U.K. manufacturing.
There could be around 250 redundancies in Spain and up to 290
redundancies in the U.K.
Shares of pub operator J.D. Wetherspoon surged 12.2%. It said
comparable sales in the 12 weeks to Jan. 18 rose 2.6%, an
improvement on fiscal first-quarter performance when sales rose
1.5%.
"We feel consumers will become increasingly more price sensitive
in 2009 and J.D. Wetherspoon is in an enviable position to take
market share," noted analysts at Altium Securities.
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