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FTSE edges lower on weaker banks, StanChart slumps
November 3, 2015 / 12:48 PM / 2 years ago

FTSE edges lower on weaker banks, StanChart slumps

* FTSE 100 edges down 0.2 pct

* StanChart slumps after update

* Housebuilders down on ratings cut

By Kit Rees

LONDON Nov 3 (Reuters) - Britain’s top share index edged lower on Tuesday, with banking stocks leading the market down after Standard Chartered announced plans to raise billions of dollars in new capital and scrapped its final dividend for this year.

Standard Chartered shares slumped nearly 9 percent to 650 pence, the biggest one-day percentage fall in more than three years, after the emerging market-focused bank said it planned to raise $5.1 billion via a rights issue. It posted a third-quarter operating loss of $139 million.

The UK banking index fell 1.4 percent, the top sectoral decliner.

“The scrapping of the final dividend payment would in itself have been a setback, let alone the overall quarterly loss against expectations of a profit for the period, but these are eclipsed by the announcement of a rights issue which is an admission of the need for assistance,” said Richard Hunter, head of equities at Hargreaves Lansdown.

James Blanchett, senior trader at H2O Markets, said his company continued to be “short” on the stock on expectations the share price could touch its September low of around 612 pence.

Short sellers, having a negative view on a stock, typically borrow shares to sell and buy back later at a lower price to return to the lender, pocketing the difference.

“We have got another 4-5 percent downside potential before we unwind our short positions and book profits,” Blanchett said.

The blue-chip FTSE 100 index was down 0.2 percent at 6,352.25 points at 1226 GMT.

Housebuilders were also in negative territory, with Barratt Developments, Taylor Wimpey and Persimmon down between 2.3 percent and 4.1 percent. That followed a ratings cut from broker Liberum, which said that valuations were too optimistic to withstand future margin pressure.

On the positive side, energy stocks tracked a rise in crude oil prices. The UK OIl and Gas index rose 1 percent.

Royal Dutch Shell and BG Group rose 0.8 percent and 1.2 percent respectively after Shell announced plans for further benefits and cost cuts from its planned $70 billion takeover of BG.

“Shell has come out to assuage investors that they can make this takeover work ... it seems that investors are taking them at their word for the time being,” said Brenda Kelly, head analyst at London Capital Group.

Shares in mid-cap Tullow Oil soared 14 percent after a positive update from its partner in Ghana, Kosmos Energy , which said a new project was on track to be completed next year. (Additional reporting by Atul Prakash; Editing by Catherine Evans)

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