Markets: The week that was (02-06/11/09)

The long wait was finally over this week as shareholders learnt the fate of the part-nationalised banks Lloyds (LLOY) and Royal Bank of Scotland (RBS).

There was anger, frustration and the odd gloating 'I'm so glad I sold out of this share in August 2008' as RBS took the title of being the most bailed out bank in the world. 

It was ordered by the EU to offload 14% of its branch network along with its card payment business RBS Insurance and Global Merchant Services and its stake in commodities trader RBS Sempra Commodities.

Lloyds fared better as it announced plans to raise £21 billion to avoid taking part in the government's asset protection scheme but it will still have to sell at least 600 branches, which account for around 4.6% of the total market share of UK current accounts.

Adding to the drama, the Bank of England voted to inject a further £25 billion into its quantitative easing scheme in a desperate bid to rejuvenate the struggling economy. 

Markets were unsurprisingly on the charged side as the speculation finally came to a head. A strong performance from the miners set the tone for Monday before all eyes turned to the banking sector revamp and jitters got the better of the market. 

Retail results on Wednesday from Next and Marks & Spencer helped to get the market back on track but the fragile stability was not to last and the FTSE 100 see-sawed between positive and negative territory for the remainder of the week.

By Friday close, it had gained around 2% over the previous five sessions to close the week at 5143. The mining sector achieved the biggest gains, up more than 7% during the week followed by automobiles & parts and the general retailers.

At the other end of the spectrum, pharmaceuticals and biotechnology companies lost around 3%.

Across the Pond, the Dow Jones pushed back over the 10,000 mark towards the end of the week despite signs that the economic recovery is far from flourishing.

On Friday figures from the Labor Department showed the jobless rate soared above 10% for the first time since 1983 in October. The Federal Reserve said that interest rates would be likely to be held at near zero for an 'extended period' even though it is seeing signs of a pick-up in the US economy.

The action from Monday

-- Oil and gas player Dragon Oil (DGO) was on flying form after announcing that majority shareholder Emirates National Oil Company has made a formal offer to acquire it.
 
The Dubai state-controlled company will purchase the final 48% of Dragon Oil that it does not already own in a deal that values the London-listed company at £2.36 billion, five months after it first made its intentions known.
 
ENOC first approached the Turkmenistan-focused company on 3 June and said at the time that it was considering an offer that would "represent a modest premium to Dragon Oil's closing share price."

-- Shares in Yellow pages publisher Yell Group (YELL) soared by 13% on Monday after the troubled group announced the requisite 95% of lenders had agreed its refinancing plans for its £3.8 billion debt mountain.

The FTSE 250 group, which has been badly hit by the advertising downturn and the rise of online publishing, was last week waiting on two lenders to approve it proposals after it pushed the deadline back three times.

It wants to extend the repayment date on its current loan facilities to 2014 in return for raising the interest rate payable by 1%.

-- The Competition Commission is investigating ITV's (ITV) £25 million sale of Friends Reunited amid fears that new owner DC Thomson will dominate the online geneology market.

The Genes Reunited business would merge with Find My Past and give the company a market share of more than 50%.

'On the basis of the evidence it received, the OFT does not believe that the current competition in this market or the potential for future entry is sufficiently strong to prevent the merged firm from reducing the quality or range of its services, or possibly raising prices," said the OFT.

The action from Tuesday

-- The government today announced long-awaited plans to invest billions more pounds in the banks and sell-off large chunks of their assets. 

Royal Bank of Scotland is in for a further £25.5 billion injection - making it the most bailed out bank in the world - while Lloyds will receive another £5.7 billion.

Both banks will also have to make divestments of "significant parts of their businesses over the next four years" to meet the demands of the European Commission.

-- It's all change at the top at Barclays (BARC) as the banking giant looks to overhaul its structure and the responsibilities of its senior management team.
 
The surprise move sees the resignation of Frits Seegers, who is currently chief executive of Barclays' retail and commercial bank.

Barclays now intends to extract the bank's commercial operations from Seegars' former empire.

-- Oil and gas company Nighthawk Energy (HAWK) has announced its Xenia gas pipeline in the US is now fully operational and flowing at more than 650,000 cubic feet of gas per day.
 
The AIM-listed company said an initial eight wells have been brought into production with a further five currently in the process of being brought on stream, in a move that will continue to ramp up flow rates. A further 22 wells have also been permitted for future drilling.
 
US-focused Nighthawk, which owns a 50% stake in the 26 kilometre pipeline, said gas is already flowing into the Bourbon County pipeline and being sold into the Southern Star Interstate transport line.

The action from Wednesday

-- Taylor Wimpey (TW-) and Redrow (RDW) today put the wind back into housebuilders' sails as they reported a welcome improvement in housing market conditions.
 
The FTSE 250-listed groups have seen firmer prices, stronger reservations and lower cancellation rates as the sector starts to emerge from one of the most severe downturns in decades.

-- High street stalwarts Marks & Spencer (MKS) and Next (NXT) today pointed to further signs of a retail revival following stronger trading in recent months.

M&S delivered pre-tax profits at the top end of expectations as tight cost and stock management paid off and food sales picked up.

Fashion retailer Next also reported better-than-expected third quarter sales, leading it to up its sales and profit guidance for the second half of the year.

-- Northern Rock says its financial performance is improving thanks to 'encouraging' economic trends, but has warned that the number of mortgage borrowers falling behind with repayments is rising.

The nationalised lender adds that although its performance in the second half of the year is expected to show a 'significant' improvement, it still anticipates making a loss for the year as a whole - driven by losses on loans.

Rising unemployment, the fragile economy and subdued housing market all give it cause for concern.

The action from Thursday

-- The Bank of England today pumped another £25 billion into its radical quantitative easing programme in a bid to support the fledgling economic recovery.

The latest move takes the total amount of new money created so far to £200 billion. 

Economists had been widely anticipating a further injection after the latest GDP figures revealed that the UK remained mired in recession in the third quarter when most other industrialised countries, including the US, have now returned to growth.  

-- Swiss banking giant UBS has been slapped with an £8 million fine for failing to stop four employees carrying out unauthorised transactions involving customer money. 

At least 39 accounts were affected by the unauthorised trading of foreign exchange and precious metals between January 2006 and December 2007 at UBS' London-based wealth management business.

The losses were then allocated to customers' accounts, the Financial Services Authority said. 

-- Broadcaster ITV (ITV) cheered investors with forecasts for a surprise rise in advertising revenue next month.
 
The FTSE 250 group is predicting a 4% rise in net advertising revenue (NAR) in December - the first monthly gain since the first half of 2008.
 
It put the improvement down to extending its lead over BBC1 in prime time viewing with shows including the X Factor and Doc Martin - allowing it to charge advertisers more.

The action from Friday

-- Royal Bank of Scotland (RBS) today revealed heavy third quarter losses with bad debts continuing to plague the part-nationalised bank.

Pre-tax losses stood at £2.1 billion for the three months to September compared to a profit of £1.9 billion in the same period in 2008 before it fell into the Government's arms.

Bad debts almost tripled in the period from the third quarter last year to £3.3 billion - but down from the £4.7 billion reported last quarter. Over the nine month period, write-offs on bad loans have risen to £10.8 billion from £2.7 billion in the same period last year. 

-- Struggling airline British Airways' (BAY) slumped to a record loss in the first half of the financial year as the recession continues to wreak havoc on the aviation industry.
 
The airline's losses before tax swelled to £292 million for the six month period ended 30 September, while its operating loss hit £111 million, in stark contrast to the £140 million profit it reported in 2008. 

The disappointing figures mark the first time BA has posted a loss during the first half of the financial year.

-- Perseverance paid off for London Mining on Friday when it made its highly-awaited debut on to the Alternative Investment Market, after embarking on an ambitious growth programme.
 
The London-headquartered iron ore and coal miner first made its intentions clear in July in a bid to expand its access to a global investment network. The company said it had been firmly focused on identifying, developing and operating scaleable mines to become a mid-tier supplier to the global steel industry.
 
The company, founded in 2005, added that its principle assets hold the potential for further expansion.