Following a rather indecisive market yesterday today was marked by a more tangible “risk off”
mentality as continued Greek worries chipped away at sentiment. It was to be noted however that,
and as has been the case for the last few weeks, the volume of shares being traded was well below
its 90 day moving average suggesting many investors were sitting on the sidelines.
Moody’s warning that it may downgrade 17 global and 114 European financial institutions certainly
didn’t help, the ratings agency citing the ongoing European debt crisis and deteriorating credit
worthiness (and therefore value) of bank governments bond holdings as a potential “vicious cycle”.
The move follows downgrades of the latter last week. They highlighted evolving challenges in the
banking industry, including more fragile funding conditions and increased regulatory burdens in
hindering the long term growth prospects and profitability. UK names on the list included HSBC and
Barclays, and although HSBC ended the day lower by 0.4% the latter actually ended the day higher
by 1.3% following a price target upgrade by Credit Suisse.
BAE systems was a heavy decliner on the index as the release of their 2011 results exposed a 14%
fall in revenues over the year as the UK and US government made defence cuts. The maker of
nuclear powered submarines, aircraft carriers and military jets suffered a £500million decline in
sales as the Ministry of Defence conducted a spending review, and announced that it expected little
sales growth in 2012. The results were described as a “weak and messy set of numbers” by Goldman
Sachs, and the market echoed the assessment by taking 2.3% of the share price which finished at
The FTSE 100 started the day under pressure although gradually made ground throughout the day to
close down a mere 0.1% at 5885p.