Banking shares were gainers yesterday, pushed ahead by hopes that the lowest point of the worst recession since the 1930s is now history. Even a review by the Bank of England highlighting the need for British banks to boost their capital over the next two years did little to dent investor enthusiasm. Standard Chartered gained 31.50p, or 1.8%, to £17.47, while HSBC rose 4.7p, or 0.7%, to 646.15p.
But the rises in banking shares failed to prevent the FTSE 100 losing 53 points, or 1%, to 5046 – its fourth consecutive day of decline. It was down 3% over the week and is now more than 11% below its 2010 peak.
Once again the damage was inflicted by BP, which lost 20.65p, or 6.3%, to 298.36p on fears about the heavy clean-up costs in the Gulf of Mexico and hurricanes. Concerns about BP's ability to pay its bills, and possible future sanctions, drove up the cost that investors pay to protect against a potential default on company debt: BP credit default swaps rose by $19,000 to $555,000 – a level similar to the cost of insuring Greek government bonds before the country was pushed into a rescue plan.
The euro finished the session practically unchanged against the US dollar at $1.2349, after falling as much as 0.5%, mirroring investors' lack of confidence in the continent's ailing economies. "Austerity measures today may address sovereign fiscal problems, but the longer-term potential ramifications on corporates, consumption and economic growth of such tightening can create challenges in their own right," Royal Bank of Canada wrote in a research note.
Ahead of the G20 summit in Canada this weekend, investors sold European stocks, bonds and currencies, adding to the pressure on EU politicians to resolve their differences and agree a growth package.
Equity markets fell across Europe, with France's CAC down 1% and Germany's DAX index 0.7% lower. Spain's Ibex index fell 0.5%.
Investors moved into what they consider safer havens, snapping up gold, which gained 0.6% to $1,244 an ounce. Financial investors who buy exposure to commodities through specialised funds have increased their holdings in the wake of the financial crisis.
Elsewhere, mining investment firm Vallar said it wants to raise £600m in a stock market listing. Vallar plans to carry out acquisitions in the sector.
Its directors include Nathaniel Rothschild, the fifth Baron Rothschild in waiting and the man who brought George Osborne and Peter Mandelson together in Corfu in 2008.
The first purchase could be worth between £2bn to £5bn, and financed via debt and by issuing additional shares. Rothschild is the former co-chairman of hedge fund Atticus Capital.
