LONDON MARKET CLOSE: Banks Dominate Pre-Christmas Trade As Stocks Rise

LONDON (Alliance News) - London stocks ended marginally higher Friday in a final half-day session before the Christmas break, though banks suffered after Barclays said it intends to fight the US Department of Justice over alleged mis-selling of residential mortgage-backed securities.

The US Department of Justice said on Thursday it filed a civil complaint in the Eastern District of New York against Barclays Bank and several of its US affiliates, alleging that Barclays engaged in a fraudulent scheme to sell residential mortgage-backed securities supported by defective and misrepresented mortgage loans.

According to the lawsuit, from 2005 to 2007 Barclays personnel repeatedly misrepresented the characteristics of the loans backing securities they sold to investors throughout the world, who incurred billions of dollars in losses as a result of the fraudulent scheme.

"Barclays rejects the claims made in the complaint. Barclays considers that the claims made in the complaint are disconnected from the facts," Barclays responded in a statement on Friday.

"We have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands. Barclays will vigorously defend the complaint and intends to seek its dismissal at the earliest opportunity," the bank said.

Barclays ended the day as one of the biggest faller in the FTSE 100 index, down 0.9%. Fellow lenders HSBC Holdings, down 1.3%, and Standard Chartered, down 0.3%, also closed among the day's losers.

While Barclays decided to fight, Deutsche Bank and Credit Suisse both settled their cases with the US DoJ. Deutsche said it has reached a tentative USD7.2 billion deal to settle a federal investigation into alleged mis-selling of mortgage securities in the same period. This was just over half the USD14.0 billion the DoJ had demanded from the bank back in September.

Credit Suisse Group also said it has agreed to pay USD5.28 billion to settle a US investigation into its business in mortgage-backed securities.

The considerably lower settlement achieved by Deutsche compared to the initial demand provided have a positive read-across for Royal Bank of Scotland Group, which has yet to open formal negotiations with the DoJ, commented Investec analyst Ian Gordon.

RBS was the only blue-chip bank to end higher on Friday, closing up 0.9%.

The FTSE 100 ended the session up 0.1%, or 4.49 points, at 7,068.17. The FTSE 250 finished up 0.1%, or 17.97 points, at 17,909.59, and the AIM All-Share closed up 0.1%, or 0.67 point, at 831.73.

The BATS UK 100 closed up 0.2% at 11,944.76 points, the BATS 250 up 0.2% at 16,293.60 and the BATS Small Companies flat at 10,590.51.

At the earlier closing time for the London stock market, the CAC 40 in Paris was flat and the DAX 30 in Frankfurt was down 0.2%. The two European stock markets will remain open until their normal closing time of 1630 GMT.

In Italy, Monte dei Paschi di Siena said it could not comply on its own with a European Central Bank order to recapitalise with EUR5 billion by December 31. The request was issued after the Italian lender came bottom in recent European banking stress tests.

Prime Minister Paolo Gentiloni said, after chairing an emergency cabinet to approve a EUR20 billion rescue package on Friday, that the aim of the bailout is to ensure "the widest possible" protection of citizens' savings and make the Italian banking sector "stronger and more solid".

Ahead of the open on Wall Street, futures indicated the Dow 30 and S&P 500 stock indices both flat and the Nasdaq Composite down 0.1%.

In UK economic news, the Office for National Statistics showed that gross domestic product grew 0.6% quarter-on-quarter in the third quarter, revised up from the previous estimate of 0.5%. This was, however, a slight slow down from the 0.7% growth seen in the second quarter.

Meanwhile, year-on-year growth was revised down to 2.2% from 2.3%, but this was still a slight improvement from the 2.1% growth seen in the second quarter.

The third quarter was the first full quarter following the result of the UK's European Union referendum at the end of June and suggested that the loss in momentum was not as much as initially expected. This is in-line with the wider resilience in UK economic data since the vote.

Another report showed the UK current account deficit widened to GBP25.5 billion in the third quarter from a revised deficit of GBP22.1 billion in the previous period. The increase in shortfall reflects deficits on total trade and secondary income.

The pound briefly rebounded following the data releases but by the end of London equity trade was lower against the dollar. At the close on Friday, the pound traded at USD1.2258 compared to USD1.2291 at the London equities close on Thursday.

The euro traded at USD1.0453 at the London close, hardly budged from USD1.0454 late Thursday.

The price of gold also was largely unchanged Friday. At the London stock market close, gold traded at USD1,131.63 an ounce, from USD1,131.06 on Thursday. Brent crude oil traded at USD54.36 a barrel at the equities close on Friday, down from USD55.04 on Thursday.

PayPoint said it has agreed the sale of its loss-making Mobile Payments business and will return proceeds from the divestment to shareholders via a special dividend. The payments firm sold the business to Volkswagen Financial Services, a unit of German carmaker Volkswagen, for GBP26.5 million in cash.

From those proceeds, PayPoint will pay a 38.90 pence per share special dividend to shareholders on January 11. The mid-cap stock closed up 2.0%.

Graphene NanoChem returned to trading on AIM after agreeing to issue up to GBP2.5 million in convertible loan notes under an agreement with Darwin Capital. Shares in the firm had been suspended when it delayed publication of its 2015 accounts and underwent a debt reorganisation earlier this year.

The notes are convertible at a price of the lesser of 18.40 pence per share or 90% of the average of five daily average share price calculations selected by Darwin from the 20 trading days prior to conversion. Shares in the company closed down 30% at 10.375p Friday.

Still ahead in the economic calendar, the Michigan consumer sentiment index and US new home sales are both at 1500 GMT, while the Baker Hughes oil rig count is at 1800 GMT.

The London Stock Exchange will reopen on Wednesday after the Christmas break. Before then in the economic calendar, the Japanese consumer price index and unemployment rate are on Monday at 2330 GMT, US consumer confidence is on Tuesday at 1500 GMT, and Japanese industrial production is on Tuesday at 2350 GMT.

On Wednesday, the British Bankers' Association's mortgage approvals are at 0930 GMT, US MBA mortgage approvals at 1200 GMT, US pending home sales at 1500 GMT, and the American Petroleum Institute's crude oil stocks at 2130 GMT.

There are no scheduled events in the UK corporate calendar for Wednesday, or the rest of next week.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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