London midday: Stocks turn lower as banks retreat; spending review eyed

(Sharecast News) - London stocks had turned lower by midday on Wednesday, with banking shares under the cosh, as investors eyed Chancellor Rishi Sunak's spending review.
Stocks kicked off the session moderately higher, taking their cue from a record close on Wall Street. Overnight, the Dow finished above 30,000 for the first time, lifted by the prospect of a smooth transition to power by US President-elect Joe Biden and reports that former Federal Reserve Chair Janet Yellen is his top pick for Treasury Secretary. The S&P 500 also hit a fresh record high.

However, by midday, the FTSE 100 was down 0.5% at 6,397.26, having rallied a day earlier.

IG analyst Joshua Mahony said the declines for financial stocks come off the back of a particularly fruitful period for the banks, with vaccine announcements from Pfizer, Moderna and AstraZeneca helping to lessen the risk of an even more drawn out economic collapse.

"Fears that a wave of bankruptcies would cripple the banks has failed to arrive thus far, with Rishi Sunak's spending spree helping to stave off many of the worst economic outcomes from such a period of economic contraction. However, while the economic picture doesn't look too bad for now, there is a risk that banks will suffer in the event we do see a sharp rise in job losses come March."

Investors were looking ahead to Chancellor Sunak's spending review, amid expectations he will announce a fresh £4.3bn stimulus package to help stave off a surge in unemployment.

"The furlough scheme has provided a critical backstop to avoid mass unemployment, yet the government will be keen to avoid a steep rise in job losses once that programme ends in March," said Mahony. "With the OBR forecasting that the end of the furlough scheme could see unemployment spike from 4.8% to 8% by the summer, it is clear that the government will have to extend or get the economy running as soon as possible. Thus today's announcement is likely to be very jobs focused, with Sunak seeking to minimise the repercussions of a March end to the furlough scheme."

In equity markets, the FTSE 350 banks index was trading down 1.8% at 2,571.56, with Barclays, Lloyds and NatWest all firmly in the red, while engine maker Rolls-Royce also lost ground after recent gains.

Media platform Future slumped after agreeing to buy GoCo in a deal that values the GoCompare owner at 136p a share, and reporting a jump in full-year profit and revenue.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "The deal is clearly a positive for GoCo shareholders, at least in the short term, but what it offers Future investors is less clear. If investors in Future wanted exposure to GoCo's AutoSave business they could have bought the shares in the market yesterday, and at a significantly lower price. We think Future has its work cut out to prove the deal adds up."

Virgin Money fell after the financial services provider reported a 77% slump in annual profit as it took a £501m impairment charge against an expected surge in bad loans.

On the upside, GKN owner Melrose rallied after saying it was trading at the top of board expectations, although it also struck a cautious note about the outlook.

Animal genetics company Genus advanced after saying it is likely to perform ahead of its previous profit growth expectations for the financial year 2021.



Market Movers

FTSE 100 (UKX) 6,397.26 -0.54%
FTSE 250 (MCX) 19,587.70 -1.02%
techMARK (TASX) 3,942.15 -0.51%

FTSE 100 - Risers

Melrose Industries (MRO) 170.35p 4.41%
Avast (AVST) 496.40p 3.42%
Unilever (ULVR) 4,481.00p 3.25%
Fresnillo (FRES) 1,082.00p 3.24%
Homeserve (HSV) 1,076.00p 2.77%
United Utilities Group (UU.) 918.60p 2.50%
GVC Holdings (GVC) 1,020.00p 2.31%
Johnson Matthey (JMAT) 2,312.00p 2.26%
Flutter Entertainment (FLTR) 13,220.00p 2.16%
SEGRO (SGRO) 923.40p 1.79%

FTSE 100 - Fallers

Barclays (BARC) 144.28p -3.94%
Rolls-Royce Holdings (RR.) 111.30p -3.84%
Lloyds Banking Group (LLOY) 38.00p -3.80%
Next (NXT) 6,560.00p -3.64%
Legal & General Group (LGEN) 262.00p -3.64%
Land Securities Group (LAND) 691.20p -3.32%
Barratt Developments (BDEV) 623.80p -3.26%
Prudential (PRU) 1,217.00p -3.18%
Rio Tinto (RIO) 4,904.50p -2.94%
NATWEST GROUP PLC ORD 100P (NWG) 161.40p -2.86%

FTSE 250 - Risers

Genus (GNS) 4,098.00p 4.54%
Hochschild Mining (HOC) 218.60p 3.90%
Centamin (DI) (CEY) 110.40p 3.61%
Frasers Group (FRAS) 463.20p 2.66%
Centrica (CNA) 46.52p 2.60%
TP ICAP (TCAP) 222.40p 2.58%
Playtech (PTEC) 379.00p 2.43%
Caledonia Investments (CLDN) 3,000.00p 2.04%
Calisen (CLSN) 195.45p 1.90%
Dechra Pharmaceuticals (DPH) 3,230.00p 1.76%

FTSE 250 - Fallers

Future (FUTR) 1,726.00p -12.03%
Capita (CPI) 46.00p -9.02%
TUI AG Reg Shs (DI) (TUI) 508.20p -7.03%
Petrofac Ltd. (PFC) 164.35p -5.87%
Virgin Money UK (VMUK) 139.85p -4.86%
Aston Martin Lagonda Global Holdings (AML) 74.00p -4.52%
Liontrust Asset Management (LIO) 1,375.00p -4.51%
Fisher (James) & Sons (FSJ) 955.00p -4.50%
Network International Holdings (NETW) 287.40p -4.14%
Paragon Banking Group (PAG) 417.40p -4.05%