LONDON (Alliance News) - London stocks opened mostly lower, with shares in Standard Chartered crashing to the bottom of the FTSE 100 after it announced a rights issue and slashed its dividend as it reported a swing to loss in the recent quarter.
The FTSE 100 index opened down 0.1% at 6,359.34 points, the FTSE 250 was flat at 17.162.96 and the AIM All-Share was flat at 740.06. In Europe, the French CAC 40 and the German DAX 30 were both down 0.1%.
Standard Chartered, down 6.3%, said it will raise GBP3.3 billion in a rights issue and axe its final dividend for 2015 to strengthen its balance sheet, as the emerging markets-focused bank reported that it swung to a third-quarter loss on a jump in impairment charges.
The two-for-seven rights issue is designed to increase the group's common equity tier one capital ratio, a key measure of financial strength, to 13.1% on June 30 levels from 11.5%. The bank said it intends to issue additional tier one securities to build its capital levels over time.
The issue price of the rights issue has been set at 465 pence, a 35% discount to the Monday's closing price of 713.60p. The rights issue is fully underwritten. The bank said that Singapore's Temasek Holdings, its largest shareholder, will take up its rights for 15.8% of existing share capital.
Societe Generale analyst James Invine called the update "weak". He said "it is difficult to assess consensus for an item like a capital increase, but we think the rights issue size is about in line with expectations". SocGen kept a Hold stance on Standard Chartered.
Meanwhile, Investec put its recommendation on Standard Chartered Under Review from Hold, calling the bank's update "awful". The broker said it has also put its forecasts under review, adding that it expects consensus to "rebase sharply lower once the detail of today's Strategic Review has been absorbed."
The news comes as Chief Executive Bill Winters revealed the outcome of a strategic review that will aim to shift the group's focus more on affluent retail clients and less on asset-intensive corporate and institutional banking businesses.
Meanwhile, housebuilders Barratt Developments, Taylor Wimpey and Persimmon were down 3.5%, 3.0% and 2.4%, respectively, after Liberum cut its recommendation on all of them to Sell from Hold. Meanwhile, Kingfisher was down 1.5% after JPMorgan initiated its coverage with an Underweight rating.
Associated British Foods was another faller, down 1.9%, after it reported a drop in pretax profit in its recently-ended financial year as currency headwinds made it difficult to grow revenue and its sugar business was hit by low sugar prices. AB Foods warned that results will also suffer in the new year.
The group, which owns discount fashion retailer Primark and British Sugar and which operates an agriculture and consumer goods arm, said pretax profit in the year ended September 12 fell 30% to GBP717 million from GBP1.02 billion the year before, whilst revenue fell 1% to GBP12.80 billion from GBP12.94 billion.
In the green, BG Group was up 1.4% while Royal Dutch Shell 'B' shares were up 0.6%. The latter upgraded its cost synergy targets from its proposed acquisition of BG by USD1.0 billion to USD3.5 billion. It said the merger is on track to complete in early 2016.
Outside company news, there is little to focus on with regards to European or Asian economic data releases, but UK's Construction Purchasing Managers' Index is scheduled for 0930 GMT.
"UK construction PMI may receive some attention, coming after yesterday's astonishingly strong manufacturing report and before tomorrow's more eagerly awaited services PMI," said Lloyds Bank.
"Last month saw a surprisingly strong construction survey, with the headline total activity index rising to 59.9 from 57.3, buoyed especially by the residential and commercial sectors. We look for a pullback to around 58.6 in October, but this would still be well above the 50 growth/contraction level," added the bank.
CMC Markets chief market analyst Michael Hewson said it expects it to "pick up on the upbeat theme ahead of Thursday's Bank of England monetary policy meeting and inflation report".
"After the strong construction report seen in September of 59.9, expectations are for a slight drop to 58.9," Hewson said.
According to FXStreet.com, economists' expectations are for the UK construction PMI reading to decline to 58.8, down from the 59.9 posted in September.
In Asia on Tuesday, the Hang Seng in Hong Kong ended up 0.9% but the Shanghai Composite closed down 0.3%. Tokyo is closed due to the Culture Day celebration.
Wall Street ended higher Monday, with the Dow 30 up 0.9%, the S&P 500 up 1.2% and the Nasdaq Composite up 1.5%.
The Reserve Bank of Australia left its interest rates unchanged, as widely expected. The policy board of the Reserve Bank of Australia left its cash rate unchanged at 2.00%. The bank had lowered the rates by 25 basis points each in February and May.
Also in the economic calendar, US Redbook index data are scheduled for 1355 GMT, ahead of the ISM New York index at 1445 GMT and US factory orders at 1500 GMT. The US economic optimism index, released by The Investor's Business Daily TechnoMetrica Institute of Policy and Politcs, also is released at 1500 GMT.
Investors also will be keeping a close eye on a speech by European Central Bank President Mario Draghi after the London closing bell at 1900 GMT.
By Daniel Ruiz; danielruiz@alliancenews.com
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