HSBC Holdings Share News (HSBA)

LONDON (Alliance News) - The main UK stock indices closed broadly flat Monday, after recovering towards the end of a session that was dominated by cautious trading as investors around the world watched the ongoing pre-democracy protests in Hong Kong.

Hong Kong's Hang Seng index dropped almost 2% Monday as police used tear-gas to break up protesters that have taken to the streets of Hong Kong to demonstrate their unhappiness with China's attempts to restrict nominations for chief executive in the 2017 elections in the former British colony.

That would mean voters would only be able to choose from a pre-approved list, and the winning candidate would also have to be formally appointed by the government in Beijing before taking office.

UK indices took early direction from the Hang Seng, opening lower. However, they managed to recover most of the early losses by the end of the session. The FTSE 100 closed fractionally lower at 6,646.60, the FTSE 250 fractionally higher at 15,390.07, and the AIM All-Share also fractionally higher at 749.58.

Major European markets failed to make the same recovery, with the French CAC 40 closing down 0.8%, and the German DAX closing down 0.7%.

After the European market close, US markets are off their lows but continuing to trade in the red, with the DJIA and the S&P 500 both down 0.3%. The Nasdaq Composite was down 0.2%.

Standard Chartered has been forced to suspend operations at five of its branches in Central Hong Kong due to the unrest in the city, while HSBC Holdings has also said it has been effected by the protests. The two UK-listed banks were the worst performing stocks in the FTSE 100 Monday, closing down 2.2% and 2.7%, respectively.

The UK banking sector was also hit after Lloyds Banking Group said that it has dismissed eight individuals following an investigation into Libor manipulation. Lloyds closed down 0.5%.

The UK's pension providers slipped after Chancellor of the Exchequer George Osborne announced the abolition of the "death tax" that currently charges 55% on unused draw-down pension pots that are transferred to dependents after death. Speaking at the Conservative party conference, Osborne announced the decision as a follow-up to the changes made to the pension market during the budget back in March.

The stocks that suffered the most back in March have been the worst hit again Monday, with Just Retirement Group down 8.5%, and Partnership Assurance down 4.6%. The larger, more diversified pension providers fared a little better, with Old Mutual down 0.8%, and Legal & General down 0.2%.

Basic resources stocks also underperformed amid the concerns over how the protests in Hong Kong will be handled by China, and also ahead of the release of the final HSBC China manufacturing PMI for September overnight.

Anglo American, Rio Tinto, and BHP Billiton were all amongst the heaviest blue chip fallers, down 2.1%, 1.3%, and 0.7%, respectively.

The supermarkets continued to come under pressure following weekend press reports that the insider who blew the whistle on the accounting problems at Tesco had attempted to raise the alarm in the past, but was ignored. Tesco last week announced that it overestimated its first half trading profit by GBP250 million. Amid an ongoing investigation by auditors Deloitte, and ahead of J Sainsbury's second quarter trading update on Wednesday, investors remain wary of the sector.

Further weighing on sentiment toward the sector, the Financial Conduct Authority announced that it has charged former Wm Morrison Supermarkets Treasurer Paul Gerard Coyle with insider dealing on Ocado shares.

Tesco ended down 1.5%, Morrison down 0.8%, and Sainsbury's down 1.1%.

Balfour Beatty was back in the spotlight, its shares falling 15% after it issued its third profit warning of the year. The construction group, the subject of a failed takeover attempt by rival Carillion, said it expects its Construction Services UK division to take another GBP75 million hit to profit this year and it has appointed auditors KPMG LLP to undertake a detailed independent review of the contract portfolio within the business.

Separately, Balfour Beatty and AMEC said that they have been selected for a nuclear waste cleanup contract at Sellafield, part of a framework deal worth between GBP240 million and GBP336 million. AMEC closed up 0.4%.

UK mortgage approvals declined more than expected to a 3-month low in August, figures from the Bank of England showed Monday. Mortgage approvals fell to 64,212 in August from 66,100 in July. Approvals were forecast to decrease to 64,800.

German consumer prices remained stable month-on-month in September, coming as a relief given that economists had been predicting a 0.1% fall in CPI. The data comes ahead of final eurozone CPI numbers on Tuesday, and final second-quarter eurozone GDP numbers on Wednesday, which will all be closely watched by the European Central Bank ahead of its monthly policy decision on Thursday.

Wolseley and recently-listed Saga will release results Tuesday, while ICAP, KCOM Group and also recently-listed AO World will put out trading statements.

By Jon Darby; jondarby@alliancenews.com; @jondarby100

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