Banks Storm Ahead in Celebration of UBS Results

The Swiss banking giant's debt and earnings news put a rocket under the European banking sector on Tuesday

Holly Cook 27 July, 2010 | 5:55PM
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Banks stormed ahead on Tuesday, taking their lead from Swiss firm UBS, which reported solid quarterly results this morning. However the blue-chip index’s overall rise was tempered by BP, among others, as investors took profits following recent speculative gains.

The FTSE 100 index closed 13.0 points ahead, up 0.2% at 5,364.1, while the FTSE 250 index traded in the opposite direction, sliding 31.7 points or 0.3% to 10,106.4. A robust start to Tuesday’s trading session was dampened in later deals by a weak Wall Street as disappointing US consumer confidence numbers outweighed slightly better than expected housing data.

The S&P/Case-Shiller Home Price Index for 20 large cities showed a 4.6% price increase over the last year but some hard hit areas such as Las Vegas and Tampa continue to show weakness. Menwhile, after a big drop off in June, consumer confidence fell again in July according to the Conference Board as consumers become even more pessimistic about the future of the economy and of their own job prospects.

Returning to the UK, BP remained in the hot seat as it reported second-quarter results today, but the actual numbers took a backseat to the official news that embattled CEO Tony Hayward will be replaced by Bob Dudley on October 1st. The move comes amidst mounting criticism of Hayward and a desire to recast the firm's strategy. Dudley plans to focus on rebuilding BP's reputation, improving safety and on divesting non-core assets. The move had been widely expected, causing shares to rally ahead of this morning’s confirmation, following which they closed 2.6% lower on Tuesday. Listen to BP's chairman explain the decision here, and read Morningstar’s hopes for the future of the company under Dudley here.

InterContinental Hotels was the main FTSE 100 faller, down 7.4% as the market reacted to Barclays Capital placing 30 million shares in the global hotelier at between 1,120p and 1,130p apiece, revised from the initial 1,110p-1,150p per share price.

More positive moved were seen among the British banks, with Lloyds Banking Group jumping 8.8% higher to top the FTSE 100 leaderboard, followed by Royal Bank of Scotland, up 7.9%, and Barclays, which took on 7.6%. The sector received a fillip after Swiss giant UBS said that it swung to a second-quarter profit, helped in part by a CHF 595 million gain on its own debt.

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Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

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