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September 28, 2010    

Royal Bank of Scotland leads London banks lower

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by Elaine Frei
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European equities markets were lower Tuesday as a decline in Irish and Portuguese bonds left concerns that the region’s debt crisis is getting worse, while a drop in US consumer confidence also caused worries as the Conference Board said that it’s confidence index dropped to 48.5, from 53.2 and against an expected drop to 52.1.

The concern about Europe’s economy was only amplified when Moody’s Investors Service cut Anglo Irish Bank’s debt rating to just one step above junk status on worries that the state-owned bank will need another bail-out and on an estimate from Standard & Poor’s that it could cost as much as $47 billion to rescue the state-owned bank.

Despite the general declines, the FTSE 100 managed to add 0.09 percent to 5,578.44 in London, although the FTSE 250 ended up 0.1 percent lower to 10,552.41.

Concerns about the economy sent London banks lower, led by a 1.56 percent decline for Royal Bank of Scotland (LSE: RBS), while in Ireland, Allied Irish Banks (ISEQ: ALBK) fell 5.7 percent and Bank of Ireland (ISEQ: BKIR) dropped 7.4 percent.

Other banks across the region also saw declines, as Spanish bank Banco Bilbao Vizcaya Argentaria (BMAD: BBVA) fell 1.1 percent, Commerzbank (FWB: CBK) and Deutsche Bank (FWB: DBK) fell 1.7 percent and 2.2 percent respectively in Germany, and National Bank of Greece (Athex: ETE) dropped 3.2 percent.

Back in London, software maker Sage Group (LSE: SGE) led gains on the 100 for the second day in a row, adding 5.14 percent, while retailer Sports Direct International (LSE: SPD) gained 4.63 percent for the best performance on the 250 and in a mixed retail sector that saw internet grocery retailer Ocado (LSE: OCDO) turning in the worst performance in the sector as it dropped 1.83 percent.

Defense and aerospace contractor BAE Systems (LSE: BA) was the worst performer on the 100 as it fell 2.51 percent, while travel agent Thomas Cook Group (LSE: TCG) dropped 6.33 percent for the worst day on the 250 after it warned that higher costs will hurt earnings.

TCG was the worst performer in the travel and leisure sector, which also saw a 1.18 decline for Tui Travel (LSE: TT) while InterContinental Hotels Group (LSE: IHG) added 0.79 percent for the best result for the day in the sector.

Investment managers Man Group (LSE: EMG) was 2.1 percent lower after it said that first-half profits will likely drop more than 55 percent.

Markets in the Asia-Pacific region were lower on concerns that Europe’s economy is not recovering after Moody’s downgraded Anglo Irish Bank’s debt rating and after news reports in China that the government there is getting set to take more steps to cool the property market by limiting loans for second and third homes.

Investors were also concerned that China will hike interest rates to cool inflation after consumer prices there were up 3.5 percent in August.

The Nikkei 225 was down 1.12 percent to 9,495.76 in Tokyo while the Topix index dropped 0.78 percent to 842.65, but the Mothers market gained 1.19 percent to 367.32 as government officials made comments about the impact on Japan’s economy of China’s informal ban on the export of rare-earth minerals to Japan.

Additionally, consumer lenders were lower after Takefuji Corp (TYO: 8564) filed for bankruptcy protection, confirming rumors that it was getting ready to do so, with Promise (TYO: 8574) down 0.9 percent while Acom (TYO: 8572) was 1.3 percent lower and Aiful (TYO: 8515) dropped 3.3 percent.

The Taiex was down 0.03 percent to 8,189.44 in Taiwan while India’s Sensex fell 0.06 percent to 20,104.86.

The Sydney Ordinaries dropped 0.11 percent to 4,717 in Australia, while the S&P/ASX200 was down 0.12 percent to 4,669.8.

South Korea’s Kospi was 0.26 percent lower to 1,855.97, the Straits Times Index fell 0.52 percent to 3,097.35, the Shanghai Composite was down 0.63 percent to 2,611.35 and the Hang Seng dropped 1.03 percent to 22,109.95 in Hong Kong.

Markets in China and Hong Kong were hurt by declines in the properties sector on the prospect of more steps to cool property prices after new home prices in Shanghai were up 8 percent in the week ending 26 September from the week before.

Poly Real Estate Group (SSE: 600048) fell 0.6 percent in Shanghai while China Vanke (SZSE: 000002) was down 2.8 percent in Shenzhen, and Guangzhou R& F Properties Co (SEHK: 2777) was 2.9 percent lower and China Resources Land Ltd (SEHK: 1109) dropped 3 percent, both in Hong Kong.

New York markets were higher despite the drop in consumer confidence and after growth in home prices slowed in July, with the Dow Jones Industrial Average up 0.28 percent to 10,842.32 in midday trade, while the S&P 500 had added 0.19 percent to 1,144.37 and the Nasdaq Composite was 0.07 percent higher to 2,371.33.

Crude oil prices were up slightly in New York trade, while metals also rose as gold remained in record territory, adding $10 to $1,308.60 per ounce at midday.

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