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RTRS: FTSE slides to 4-yr low, banking jitters intensify
 
* FTSE falls 0.5 percent to fresh four-year low

* Banks hammered on funding concerns

* Miners, energy stocks up on rising commodities

For full coverage of financial turmoil, click on [nCRISIS]

LONDON, Oct 7 (Reuters) - Britain's top share index fell 0.5 percent early on Tuesday after hitting a fresh four-year low and adding to the previous session's dramatic losses, as funding worries battered ailing bank stocks.

The FTSE, as expected, opened higher after the biggest single cut in Australian rates since 1992 lifted stocks in Asia and helped commodity and oil prices recover from their heavy falls the previous session.

But this sharp opening rise in UK and European stocks was soon reversed as reports of funding talks between the government and banks sent shares in Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) to a 13-year low.

By 0849 GMT the FTSE 100 .FTSE was down 13.2 points at 4,576 after posting its biggest ever one-day points fall to a four-year low the previous session. The index is dow 29.7 percent this year.

Banks were once again in the red adding to heavy losses they saw on Monday, as jitters on the sector came to the forefront again with traders citing media reports that the UK government may invest billions of pounds in banks including Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz).

Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) fell 14.6 percent, Lloyds (LLOY.L: Quote, Profile, Research, Stock Buzz) lost 19 percent and Royal Bank of Scotland lost 34 percent, the biggest faller in the blue-chip index, with traders citing news reports that banks are approaching the Bank of England for funding.

A Barclays spokesman denied "categorically" that the bank had requested capital from the government.

An industry source told Reuters that the British government and banks would discuss the structure of any recapitalisation over the "next couple of days."

UK finance minister Alastair Darling said on Monday that a banking bill would be introduced to parliament this afternoon.

"The macro backdrop is deteriorating, and while the pace of the deleveraging process has taken everyone by surprise by its intensity, the inevitable consequence is going to be a longer and deeper economic downturn," said Jeremy Batstone-Carr, head of private client research at Charles Stanley.

Embattled HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) fell 16.7 percent, reversing opening gains made after Commonwealth Bank of Australia (CBA.AX: Quote, Profile, Research, Stock Buzz) said it had started exclusive talks with the British mortgage bank about a potential takeover of its Australian operation BankWest, estimated to be worth $1.45 billion.

The Reserve Bank of Australia unexpectedly cut interest rates by 1 percent and speculation is now mounting that the Bank of England will cut rates from the current 5 percent by as much as 50 basis points when it meets on Thursday.

But investors remained cautious on the outlook for the equity market as turmoil in the financial markets is seen as having a lasting negative impact on the global economy.

"A concerted move by central banks to cut global rates would be seen as an unmitigated positive," said Batstone-Carr.

Other financial stocks also fell with insurers Aviva (AV.L: Quote, Profile, Research, Stock Buzz) down 6.5 percent and Prudential (PRU.L: Quote, Profile, Research, Stock Buzz) off 2 percent. Thomson Reuters (TRIL.L: Quote, Profile, Research, Stock Buzz) bucked the trend, adding 1.8 percent.

Miners gained as metals recovered, helped by the Australian rate cut move, with Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz), Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) and Fresnillo (FRES.L: Quote, Profile, Research, Stock Buzz) up between 2.4 and 4.1 percent.

Energy stocks benefited from higher crude prices CLc1 with BP (BP.L: Quote, Profile, Research, Stock Buzz) up 0.8 percent, and Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) gaining 0.9 percent.

Defensive pharmaceuticals stocks were supported with GlaxoSmithKline (GSK.L: Quote, Profile, Research, Stock Buzz) up 2.2 percent and Shire (SHP.L: Quote, Profile, Research, Stock Buzz) adding 3.7 percent. (Editing by David Cowell)

Source