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Banks dampen hopes of a FTSE 100 recovery after failing US stress tests

Last updated: 08:39 27 Mar 2014 EDT, First published: 09:39 27 Mar 2014 EDT

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The heavyweight banking sector poured cold water on a potential fightback from the FTSE 100 after several lenders failed US Federal Reserve stress tests.

Royal Bank of Scotland (LON:RBS) and HSBC (LON:HSBA) fell 1.6% and 0.8% respectively.

The pair’s American units, HSBC North American Holdings and RBS Citizens Financial Group, were among five banks to fail stress tests.

The US central bank rejected plans from the banks to raise dividends and other shareholder returns based on the strength of their balance sheets.

25 other banks were given the go-ahead for their planned dividend payments.

HSBC’s fall knocked around 3 points off the top flight index, which fell 0.6% to 6,565.

Engineering support services group Babcock (LON:BAB) dropped 6% after its £1.6bn deal for helicopter services group Avincis.

The fall could be accounted for by the cash call that will fund the acquisition. A five-for-thirteen rights issue at 790p a share will go towards the purchase.

Weak miners also weighed on the Footsie, with heavyweights Anglo American (LON:AAL), Rio Tinto (LON:RIO) and BHP Billiton (LON:BLT) also dragging down the top 100 share index.

SSE (LON:SSE) fell 2.5% as the energy watchdog, Ofgem, referred the so-called ‘big six’ firms for a full-scale competition probe.

At the other end the winners were few and far between. However, sports TV rivals BSkyB (LON:BSY) and BT (LON:BT.A) were the top two performing shares, up a modest 1.4% and 0.9% respectively.

On the mid-cap index, oil group Afren (LON:AFR) fell 3.7% after lacklustre profits, while rival Cairn Energy (LON:CNE) rose 3% as Goldman Sachs, Investec and Panmure Gordon upgraded the shares to ‘buy’ following the recent share price slide.

Over on AIM, Sunrise Resources (LON:SRES) sparkled 6.5% higher after positive sampling results from its Nevada copper project that will now lead to more follow-up work.

Drilling meanwhile is set to begin at the Cue diamond project in Western Australia, the company added.

Greka Drilling (LON:GDL) and Greka Engineering  Technology (LON:GEL), which were both spun out of Green Dragon Gas (LON:GDG), were also among the risers, up 9% and 35% each.

Beowulf Mining (LON:BEM) joined them 15% higher at 5.3p.

Strategic Natural Resources (LON:SNRP) lost 55% after receiving a winding up petition from offtake partner London Commodity Brokers (LBC), which is claiming around $1.15mln.

The company says it has been in talks with LCB over the amount due and over settlement terms.

It has also been informed today by Elitheni Coal, in which it has a 74% stake, that it received notice of a court order by the High Court of South Africa.

Strategic Natural said: “Whilst the SNR directors are urgently seeking legal advice in order to clarify the position, it is their preliminary understanding that this order effectively freezes the company's entire interest in Elitheni and confirms the jurisdiction as the Republic of South Africa to any further claims by the applicant, Thelo Rolling Stock Leasing (Pty) Ltd ("Thelo") against SNR or Elitheni (the "Court Order").”

Iofina (LON:IOF) fell 13% to 54.5p after saying its fifth iodine extraction plant (IO#5) has been completed and final approvals of this and its IO#4 facility are expected soon.

The group gave the update as part of wider progress report. 

In it, Iofina revealed it will now carry out an operational review assessing ways of improving the construction process as well as reducing the cost and time it takes to build the operations.

No new full-scale plants will be built until the review is completed in the autumn, the company said.


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