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FTSE rally proves short-lived | |
(about 2 hours later) | |
(Morning): An early rally soon fizzled out with the FTSE 100 down 22.21 points at 6,366.52 in mid-morning trade. | |
Shares had jumped at first after the stress test results for European banks were seen as better than expected. | |
But shares in Lloyds fell 2.4%. The European Banking Authority's results showed Lloyds only narrowly passed the capital under adverse scenarios test. | |
As a result, there are doubts over when Lloyds will be able to restart dividend payments. | As a result, there are doubts over when Lloyds will be able to restart dividend payments. |
"The news will weaken Lloyds' position as it negotiates with the FCA about restarting dividend payments, and the share price fall reflects a hasty recalculation among investors about the chances of an income stream from the bank in the future," said Chris Beauchamp, market analyst at IG. | |
Other UK banks were also trading lower, with Royal Bank of Scotland down 1.9% and Barclays falling 1.3%. | |
The biggest reaction to the stress tests was seen in Italy, where shares in Monte dei Paschi sank 15% before being suspended. The stress test revealed it had a capital shortfall of €2.1bn (£1.65bn, $2.6bn). | |
Travel shares were in favour as oil prices fell and worries about the impact of the Ebola virus eased. | |
Travel company TUI Travel rose 2%, cruise operator Carnival was 1.4% higher, and Intercontinental Hotels Group climbed 1.8%. | |
The price of Brent crude oil dipped after Goldman Sachs cut its oil price forecasts. | |
Goldman now expects Brent to be about $85 a barrel in the first quarter of 2015, compared with its previous forecast of $100. | |
It has also cut its forecast for the price of US crude to $75 a barrel from $90. | |
Brent crude for December delivery fell 25 cents to $85.88 a barrel, while US edged up 2 cents to $81.03 a barrel. | |
On the currency markets, the pound rose 0.05% against the dollar to $1.6097, but fell 0.04% against the euro to €1.2693. |