Shares in Lloyds Banking Group and other financial institutions have increased after the European Central Bank (ECB) pumped almost Euro 489bn (£409.3bn) of loans into the sector.
The ECB has loaned money to 523 unnamed banks in what is the largest liquidity operation ever for the central bank. The loans will be offered on a three-year term for the first time.
Despite shares in banks rallying, London Stock Exchange’s FTSE 100 Index was down slightly at 5384.88 during afternoon trading, following a strong session on Wall Street which pushed the Dow Jones Industrial Average nearly three per cent higher. Shares across the Atlantic were also boosted by better-than-forecast figures for US housing starts.
London’s top flight failed to keep pace with the bigger gains seen in continental Europe, even though financial stocks dominated the risers board in the capital. Exane BNP Paribas upgraded its rating on the stock of Lloyds Banking Group to outperform, causing the bank’s shares to go up 1p to 24.6p.
If Lloyds can avoid raising new capital and economic conditions stabilise then the valuation of its core business will begin to look compelling, analysts believe.
Other banks also performed well, with Barclays 5.4p ahead at 176.8p and Royal Bank of Scotland up 0.7p to 20.4p. HSBC’s shares increased by 8.6p to reach 492.5p.
But there was bad news in the retail sector, with chocolatier Thorntons announcing it was unlikely to make a profit in its financial year to June. Analysts have slashed their previous predictions for profits of around £4m after Thorntons blamed poor trading on discounting by its rivals. The chocolatier’s shares dropped by a third, down 12.5p to 25.5p.
Shares in Marks & Spencer also fell, falling 4.55p to 304.95p, while Tesco dropped 7p to 381p and Sainsbury’s was 4.55p lower at 288.35p.
FTSE 250 company Halfords fell 8.7p to 292.3p, while Dixons Retail Group dropped 9.2p to hit 9.6p.
Fashion brand Mulberry enjoyed a rise of five per cent in its shares, up 72p to 1482p, following its announcement that it had recruited 46-year-old Bruno Guillon from Hermes to become its new chief executive. Guillon will replace current executive chairman Godfrey Davis, who has been in charge during a period of impressive growth for the UK company.
Holidays business Travelzest’s shares dropped by 25 per cent or 2.1p to 6.25p. The company said it had rejected a takeover approach from Canadian company Red Label. Travelzest also said it plans to sell a number of under-performing UK assets so it can focus on its more successful operations in Canada.
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