London Report: FTSE weakens after insurers and banks fall

THE UK’S top share index weakened yesterday, with insurer RSA sinking after a profit warning while banks also dropped sharply.

RSA shed 6.3 per cent in brisk volume after saying that insured losses caused by recent severe weather in Europe and Canada were “materially above assumptions” and that full-year returns to shareholders were likely to suffer.

ETX Capital’s head of trading Joe Rundle, however, remained sanguine on the shares – currently at 121 pence – which found support yesterday at their 200-day moving average at 120p.

“I would buy them now... It’s a short-term hit on profits but what it actually does is increase medium-term profitability because it will push premiums up,” he said.

Rundle reckoned that, in the next 12 months, the shares could rise as high as 150p.

Trading volume in RSA stood at 480 per cent of its 90-day daily average, well above the FTSE 100 on 110 per cent.

The UK benchmark closed down 16.78 points, or 0.3 per cent, at 6,746.84 points, led down by banking stocks which knocked nearly 13 points off the index.

Europe’s largest bank HSBC shed 0.7 per cent and Barclays fell 2.4 per cent, with dealers citing continuing regulatory probes which are forcing affected firms to set aside ever growing pots of cash to settle cases.

On Monday, HSBC said it was trawling through sales of investments to more than 200,000 customers amid fears of another mis-selling scandal. Royal Bank of Scotland slipped 1.7 per cent and traders pointed to Exane BNP Paribas’ downgrade of the UK lender as an additional drag on sentiment.

Miners helped limit the index’s losses, up 1.5 per cent, bolstered by a private survey showing the services industry in top metals consumer China picked up in October in further evidence its economy has stabilised.

“We like the energy and materials sectors in the UK – on a general improvement in the global economy, also relative valuations,” said James Butterfill, equity strategist at Coutts.

The third-quarter earnings season has helped underpin the equity market rally, with half of European companies to have reported so far having beaten or met earnings expectations, data shows.