Lenders drag FTSE down amid negative rates talk

The UK’s biggest high street lenders pulled markets lower on Thursday after they were hit by talk of possible negative interest rates.

Natwest, Barclays, HSBC and Lloyds were all in the red as the day ended, dropping between 1.2% and 3%.

The Bank of England may have held off on making any changes to interest rates, but just the talk of negative rates was enough to spark a slide for the banks, said Michael Hewson, an analyst at CMC Markets.

The news sent Natwest’s shares to their lowest point in four months.

The struggling banks helped push the FTSE 100 down by half a per cent to 6049.92 points, a drop of 28.56.

On the other side of the pond, a similar story played out, as action – or perhaps the lack of it – by the Federal Reserve on Wednesday left traders unimpressed.

“The markets still couldn’t shake the niggling feeling that the Fed let them down on Wednesday night,” said Connor Campbell from Spreadex, nor were they helped by worse-than-expected US jobs figures.

By the end of play in Europe on Thursday, the S&P 500 lost 1%, while the Dow Jones was down 0.4%.

In Europe, the Cac index in France lost 0.5%, while Germany’s Dax dropped by 0.2%.

Mr Hewson said: “Markets in Europe have come under pressure today, though they are off their lows, as concerns about the economic outlook, and the timing of a vaccine contribute to a prevailing sense of renewed uncertainty, as the World Health Organisation warns about an alarming rise in coronavirus cases across Europe.

“The WHO’s regional director for Europe expressed concern that weekly cases are now exceeding those when the pandemic peaked in March, and that the increase is a wake-up call for governments all over.”

In company news, the retailers managed to offset some of the FTSE’s retreat, with Next, Sainsbury and Ocado top of the pile.

Next was first after the news that its profits will be vastly ahead of previous expectations. The clothes retailer now expects to make around £300 million before tax this year – £105 million more than it had predicted just two months ago. Shares jumped up 4.2%.

As Office for National Statistics data showed that nearly two thirds of adults are now travelling to work, the highest proportion in months, ticket sales app Trainline revealed that it expects to report up to lose up to £19 million in the six months to August 31 as sales slumped.

But investors were not put off, and encouraged by better trading in the second quarter they sent Trainline’s shares up by 3.6%.

Shareholders fired a warning shot across Ryanair boss Michael O’Leary’s desk on Thursday when less than two thirds of them voted for his pay package, worried over his nearly half a million euro bonus at a time when the airline is struggling with reduced demand.

But on the markets they were kinder to the Irishman, sending the shares in Ryanair up by 1%.

Carnival’s shares were rather unaffected, up merely 0.1%, after its subsidiary P&O Cruises cancelled all cruises until January, a two-month extension.

The biggest risers on the FTSE 100 were Next, up 256p to 6426p, Sainsbury, up 6.15p to 191.15p, Ocado, up 71p to 2712p, Segro, up 21.6p to 964.8p, and Rentokil, up 11.6p to 556.8p.

The biggest fallers on the FTSE 100 were Polymetal, down 69p to 1881p, WPP, down 19.8p to 628p, Natwest, down 3.05p to 100.05p, Taylor Wimpey, down 3.2p to 110.1p, and Standard Chartered, down 9p to 372.6p.