MARKET COMMENT: UK Stocks Close Mixed; Banks Lead Blue-Chip Fallers

LONDON (Alliance News) - Both the FTSE 100 and the FTSE 250 closed slightly higher Monday, despite being weighed upon by banking stocks, which fell in the aftermath of disappointing results from German lender Deutsche Bank.

Meanwhile, trading volumes were low as Wall Street is closed for the Martin Luther King Jr. Day bank-holiday.

The FTSE 100 closed up 0.1% at 6,836.73, the FTSE 250 closed up 0.3% at 16,227.11, while the AIM All-Share closed down 0.3% at 882.34.

The FTSE 350 banking sector index, closing down 0.9%, was the biggest falling sector Monday, weighed heavily upon by FTSE 100-listed Barclays and Royal Bank of Scotland.

The banks were knocked after Deutsche Bank unexpectedly revealed a loss in its fourth quarter results. The Frankfurt-based bank posted a pretax loss of EUR1.15 billion in the final three months of 2013 after it was forced to set aside EUR528 million for legal costs - bringing the total bill for the year to EUR2.5 billion.

Shore Capital analyst Gary Greenwood said that the loss can partly be attributed to a weak performance in its fixed income, currencies and commodities business, which saw income fall by 31% year-on-year. This has hit both Barclays and RBS as FICC income is expected to represent 20% and 15% of the banks' respective total incomes for 2013.

Furthermore, "This follows on from a number of disappointing fourth quarter upgrades from the large US investment banks, which also highlighted weak performance in this area," says Greenwood.

Barclays closed down 2%, making it the biggest faller in the blue-chip index, while RBS closed down 1.3% as the third biggest faller.

The poor FICC trading has also weighed on the operating performance of FTSE 250-listed interdealer brokers ICAP and Tullet Prebon. ICAP closed down 4.3%, making it the biggest loser in the index, while Tullet Prebon closed down 0.9%.

Away from the banks, gold miners performed well Monday. Fresnillo and Randgold Resources, closing up 6.1% and 4.2% respectively, closed as the leading gainers in the FTSE 100, while Polymetal International, closing up 5.8% was one of the biggest winners in the FTSE 250. The companies all benefited from a strengthening price of gold and silver.

At the close of the London equity market, gold trades at USD1,255.20, having hit USD1,261.97 during the trading day, its highest level since December 11 2013, while silver trades at USD20.290.

Elsewhere, Tesco, closing down 0.5%, was another big blue-chip faller Monday. The Sunday Times revealed that the food retailer was weighing up a surprise swoop for Mothercare, the troubled baby products chain, as part of its wider campaign to reinvigorate its British hypermarkets. London-listed Mothercare, meanwhile, closed up 6.3%.

The only UK economic indicator Monday was the latest Rightmove house price survey, which showed prices rising at 1.0% month-on-month in January following two consecutive months of declines heading into the year-end. Year-on-year, prices increased 6.3%, the sharpest rise since November 2007, Rightmove said.

There was a further boost to the UK economic outlook after Sky News reported that the International Monetary Fund is on the brink of upgrading its growth forecast for the UK by more than any other economy. The IMF is said to be increasing its projection for UK growth in 2014 to 2.4% from 1.9%.

In Asia, China's economic growth was seen to ease in the fourth quarter amid slower gains in industrial production, investment and retail sales, data released by the National Bureau of Statistics showed Monday.

The gross domestic product grew 7.7% year-on-year in the fourth quarter of 2013, following a 7.8% gain in the third quarter. This was slightly better than the 7.6% growth expected but still the lowest level of yearly growth for 14-years. On a quarterly basis GDP expanded by 1.8% in the third-quarter, slower than the 2.0% expected.

In a separate release, the statistical office revealed that China's industrial production grew 9.7% year-on-year in December compared with an expected 9.8% gain and slower than a 10% growth reported in November.

In another quiet day of economic releases Tuesday, economic sentiment data for both Germany and the eurozone are released by the ZEW at 1000 GMT. The UK CBI industrial trends survey is released at 1100 GMT. In the US, the Redbook index is released at 1355 GMT.

In the corporate calendar, blue-chip SABMiller releases its third quarter trading statement, while FTSE 250-constituents Intermediate Capital Group, Carphone Warehouse and PZ Cussons release interim management statements. Also in the FTSE 250, Cairn Energy provides and operational update report, African Barrick Gold releases its fourth quarter results, and Polymetal International reveals its fourth quarter production results.

Meanwhile, large-cap Unilever is expected to report roughly flat core earnings per share for 2013, despite a decline in total revenues, as cost cutting and product innovation keeps margins up, say analysts.

By James Kemp; jameskemp@alliancenews.com; @jamespkemp

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