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FTSE rally proves short-lived Lloyds leads FTSE 100 lower
(about 1 hour later)
(Morning): An early rally soon fizzled out with the FTSE 100 down 22.21 points at 6,366.52 in mid-morning trade. (Noon): An early rally soon fizzled out, with Lloyds Banking Group the biggest faller on the FTSE 100 after it narrowly passed European stress tests.
Shares had jumped at first after the stress test results for European banks were seen as better than expected. Shares in Lloyds fell 2.4%. The European Banking Authority's results showed Lloyds only narrowly passed the capital under adverse scenarios test.
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 FTSE 100 index was down 4.94 points at 6,383.79.
"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."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%. Other UK banks were also trading lower, with Royal Bank of Scotland down 1.1% and Barclays falling 0.9%.
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). The biggest reaction to the stress tests was seen in Italy, where shares in Monte dei Paschi sank more than 15% and were then 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 shares were having a better day 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%. Travel company TUI Travel rose 2% and Intercontinental Hotels Group climbed 2.5%.
The price of Brent crude oil dipped after Goldman Sachs cut its oil price forecasts.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.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.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.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. On the currency markets, the pound rose 0.04% against the dollar to $1.6096 and was unchanged against the euro at €1.2699.