London midday: Stocks tread water ahead of US jobs data

Losses are reasonably modest considering that some heavyweights from the banking sector are in the doldrums following a downgrade of 12 financial institutions by ratings agency Moody's. Stocks seem to be treading water ahead of a key employment report due out in the US before the opening bell in New York. All eyes will be on the non-farm payrolls figure for September, where a 50,000 gain is expected after a flat reading in August.Meanwhile, the UK producer price index for the month of September rose at a 0.3% on month (6.3% on year) pace, according to the latest data from the Office for National Statistics. Market consensus has been expecting a rise of 6.2%. GERMANY AND FRANCE IN DISAGREEMENTWhile hopes that the European Union is planning for a co-ordinated recapitalisation of the continent's banks has helped gains over the last few days, there are supposed differences between Sarkozy and Merkel on how to proceed in this regard.According to a source cited by Reuters, Germany believes that the European Financial Stability Facility (EFSF) should only be used as a last resort if a country cannot recapitalise its banks using its own resources. However, France wants to use the EFSF in order to recapitalise its own banks due to exposure to Greece, as explained by a German source."The French have misunderstood the EFSF. Our position is that banks should seek money in the markets first, then come national backstops, and only when there is no money available would it kick in at the European level," the source said.BANKS LEAD THE FALLERS The banks were the worst performers after Moody's issued a downbeat report on the UK financial sector. Lloyds TSB, Santander UK and the Co-Operative Bank were downgraded one notch, while Nationwide and RBS went down two levels. The reasoning for the downgrade was that Moody's wanted to reflect the ending of the UK government's implicit guarantee for all banks. It makes clear in its statement that the downgrade is not a comment on the stability of the British banking system as a whole. Unsurprisingly, RBS was the heavy faller. The bank issued a statement saying that it has made "significant progress" in strengthening its credit profile since 2008, when it received a £45bn bail-out from the UK government, leaving the firm 83%-owned by the state. As of 30 June, the core tier one capital ratio stood at 11.1%. "We are disappointed that Moody's have not acknowledged the progress we have made in strengthening the bank's credit profile," RBS said. However, an article this morning by the Financial Times, speculated that the firm may have to receive more aid after its core tier one capital ratio factors in the banks' exposure to the escalating debt crisis in Europe. "[RBS's] sovereign exposure is not fundamentally worrying but if there is a broader European drive to recapitalise the banks it's conceivable they may need more government money," a government official told the paper. Lloyds fell lower after its downgrade, while Barclays was in the red in sympathy. The retailers were offsetting some losses, with Kingfisher, Dixons Retail, Debenhams and Greggs in demand.HEAVY FALLS ON THE FTSE 250 Premier Foods, the FTSE 250 food manufacturer which has been struggling with rising raw material costs, has admitted that its third quarter results are "significantly below our expectations". Shares dropped over 40% after the group warned that full-year trading profits will be below market expectations. Finnish nickel and zinc miner Talvivaara Mining lost over 20% of its market value after chief executive Pekka Pera resigned as the company goes into cash conservation mode. The company said that, in view of the current volatility and uncertainty in the commodity and financial markets, it has developed a revised operating plan and made the strategic decision to focus on maximising profitability of operations rather than the production volume over the remainder of 2011.BCFTSE 100 - RisersKingfisher (KGF) 255.30p +3.15%Weir Group (WEIR) 1,574.00p +2.81%Petrofac Ltd. (PFC) 1,248.00p +2.21%Reckitt Benckiser Group (RB.) 3,424.00p +1.75%Wolseley (WOS) 1,682.00p +1.69%G4S (GFS) 275.60p +1.47%ITV (ITV) 61.40p +1.40%Cairn Energy (CNE) 291.70p +1.39%BG Group (BG.) 1,298.50p +1.37%Reed Elsevier (REL) 518.00p +1.27%FTSE 100 - FallersRoyal Bank of Scotland Group (RBS) 23.38p -4.02%Barclays (BARC) 162.90p -2.95%SABMiller (SAB) 2,185.00p -2.78%Whitbread (WTB) 1,591.00p -2.69%Lloyds Banking Group (LLOY) 34.91p -2.65%GKN (GKN) 178.30p -2.25%Ashmore Group (ASHM) 318.60p -2.21%British Sky Broadcasting Group (BSY) 674.50p -2.18%Old Mutual (OML) 107.00p -2.01%Unilever (ULVR) 2,009.00p -2.00%