FTSE 100 firm despite banking drop

Tuesday 29th July 2008

The FTSE 100 closed up just 0.18 per cent today – holding onto its position from yesterday, despite an overnight slump in New York.

The index closed up 9.4 points to 5,322 – following yesterday's pattern of a slight fall to end the day.

HBOS and Barclays fell 5.74 per cent and 4.21 per cent – following banking losses announced in the US for Merrill Lynch and data showing mortgage lending hit a record low in the UK.

Legal & General fell 3.34 per cent, BG Group dropped 3.11 per cent and British Land was down 2.97 per cent.

Heading the risers on the FTSE 100 with catering company Compass Group – up 6.5 per cent after its announcement yesterday that operating profits were above last year's level.

Builders merchant Wolseley rose 5.25 per cent, Marks & Spencer was up, and power generator Drax rose 3.47 per cent.

British Airways was up 4.69 per cent to 245.50p after the announcement of a potential merger with Spanish rival Iberia.

Focus now turns to whether the relative stability of the last few days is the calm before the storm or if the index is resting before attempting a push up.

David Jones, chief market strategist at IG Index, said: "The past 24 hours have shown that one thing that still lingers is the spectre of subprime and the subsequent mortgage market fall out.

"Last night’s news from Merrill Lynch about further write offs in the current quarter have weighed on UK banks today."

He added: "This is going to be the real test for the financial sector – the news flow remains negative but investors seem to be waiting to see if the market has already factored the worst case into share prices.

"As long as the bellwethers like RBS and Barclays do not slip to fresh lows for the year, then banks may once again prove to be attractive for bottom picking bargain hunters."

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