Lloyds Banking Group Share News (LLOY)

Fri, 29th Jun 2012 09:23

By Toni Vorobyova

LONDON, June 29 (Reuters) - Britain's FTSE 100 jumped to a

one-week high in early trade on Friday, as an unexpected raft of

measures to tackle the euro zone crisis lifted risk appetite,

outweighing a scandal over dodgy practices at UK banks.

At a summit which was expected to yield very little, euro

zone leaders agreed to take emergency action to bring down Italy

and Spain's spiralling borrowing costs, create a single

supervisory body for euro zone banks, and enable the bloc's ESM

bailout fund to lend directly to recapitalise banks without

preferential seniority status.

'There were very limited expectations, they've done well,'

said Andy Ash, head of sales at Monument Securities.

'Markets will be very relieved to go and see the summer

through with somebody who has got authority to keep a lid on

European bond yields. I don't think it's going to absolutely run

away but it has certainly limited the downside.'

The benchmark index was up 1.3 percent, or 72.27

points, at 5,565.36 points by 0749 GMT, as bearishly positioned

market players scrambled to cash in on the rally on the last

trading day of the month and of the quarter to boost their

performance for the period.

The index rose as high as 5,594.54 in early deals, but

failed to remain above the technical resistance posed by the

200-day moving average around 5,578 points.

The euro zone news offered some support to UK banks, which

have direct exposure to the bloc's sovereign bonds, taking off

some of the negativity unleashed by investigations into rate

fixings and product mis-selling in the sector.

The banking sector added 1.6 percent, sharply

underperforming a jump of 5.9 percent in its euro zone

counterpart thanks to news that Barclays, HSBC , Lloyds and RBS have agreed to pay

compensation to customers they misled about interest rate

hedging products, following an investigation by Britain's

financial regulator.

That comes alongside an investigation into the manipulation

of LIBOR interbank rates, which has already seen Barclays pay a

record fine and may well cost its CEO Bob Diamond his job.

'Banks have clearly been involved in some very poor business

practices  The question is what the litigation claims will be

relating to these issues, that is much more significant than any

fines, and the second question is whether there is more things

that have yet to be unearthed,' said Gary Greenwood, banking

analyst at Shore Capital.

'I tell my clients to de-risk their positions.'

Barclays, which tumbled 15.5 percent in the previous session

in its biggest one day fall since 2009, flitted either side of

the no change line on Friday in volatile trade.

Lloyds, which has said it does not expect the financial

impact from the hedging settlement to be material, added 2.6

percent.

The market will also pay attention to euro zone flash

inflation for June and to U.S. personal incomes and consumption

data as investors seek to determine the chances of rate cuts or

more quantitative easing from the central banks.



(Reporting By Toni Vorobyova; Editing by Catherine Evans)

(antonina.vorobyova@thomsonreuters.com)(+44 207 542 9828)(Reuters Messaging: antonina.vorobyova@thomsonreuters.com)

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