FTSE 100 closes lower after RBS, IAG decline
U.K. stocks decline as RBS and IAG lead the way downwards
Led by shares of Royal Bank of Scotland PLC and International Consolidated Airlines Group SA, U.K. stocks declined on Friday. London index came under further pressure on renewed hopes for a post-brexit trade deal. The FTSE 100 index UKX, -0.11% shed 0.1% to close at 7,244.41, for the second day in a row.
For the week, the benchmark ended with a 0.7% loss, marking its fifth losing week in six. U.K. stocks were behind other major European indexes, with the Stoxx Europe 600 SXXP, +0.22% ending up 0.2% at 381.16. The pound GBPUSD, +0.0860% fetched $1.3973, up from $1.3957 late Thursday in New York.
Sterling rose in the afternoon after reports that the brexit cabinet committee has agreed on a proposal for post-Brexit trade with the EU which is dubbed “Canada plus plus plus” by the brexit secretary, David Davis as it aims for a similar trading relationship which Canada has with the EU, but with better access to the single market than Canada has.
A stronger pound can weigh on the FTSE 100 as about 75% of the benchmark’s revenues are made overseas and therefore shrinks when translated back into sterling. Investors were also occupied by earning reports and corporate updates coming at end of the week.
RBS shares RBS, -4.82% RBS, -3.78% dropped 4.8% as the lender said it swung to its first full-year profit in 10 years in 2017. However, the bank said it still has to resolve a settlement with the U.S. Department of Justice over alleged mis-selling of mortgage-backed securities.
International Consolidated Airlines Group SA shares IAG, -5.69% ICAGY, -4.62% fell 5.7%. The British Airways parent said it was engaging a €500 million euros share-buyback program, and that pretax profit rose in 2017. The results were mixed, said Accendo Markets, with revenues in line while adjusted per-share earnings of €1.02 fell short of a €1.06 consensus estimate.
Pearson shares PSON, -0.68% fell 0.7% as the company said that it plans to sell its U.S. K-12 curriculum business and is currently in talks with potential buyers. Pearson swung to a pretax profit in 2017, but cut its dividend for the year.
BT Group PLC BT.A, +5.04% BT, +6.22% gained 5% after the U.K. communications regulator, Ofcom, lifted the planned price cap on the amount the company can charge rival providers for using its physical infrastructure. In an additional boost to the stock, Berenberg lift BT to buy from hold.
The chief market analyst at IG, Chris Beauchamp said in a note that while there hasn’t been much upside, there was no major selloff in the week, an encouraging development that clearly bodes well for the week ahead.
He added that RBS has worked its socks off to highlight the rare sight that is a profit from the state-backed institution, but with so many litigation issues hanging over it the shares remain a tough sell among investors. The impending US fine means this year’s profit will be a one-off for the time being, and one can’t blame those looking to sell off the back of today’s figures.