It was a grim end to what had started as a bad week in financial markets, with the risk-off trade dominating flows. Adding to concerns this morning was a Moody’s downgrade of 16 Spanish banks yesterday, with significant thee-notch cuts for the three biggest institutions of Santander, BBVA and La Caixa. The UK Domiciled subsidiary Santander UK Plc didn’t escape, and whilst customers have voiced concerns, deposits of up to £85,000 are covered by the Financial Services Compensation Scheme. Moody’s cited a deterioration in the Spanish economy, highlighting the ongoing property crisis and the high levels of unemployment, and a reduced ability for the Spanish government to provide support to the sector.
The Spanish banks themselves did however trade slightly higher today, recovering losses from yesterday. Bankia, which was down 30% at one stage yesterday following rumours of €1 billion of retail withdrawals, soared today on rumours that there may be a short-selling ban imposed on financial stocks. Sentiment towards the sector was improved somewhat by news that the Spanish government had hired Goldman Sachs and Oilver Wyman to carry out audits into its banks.
Today saw the much anticipated Initial Public Offering of Facebook on the Nasdaq market in the US, at $38 per share the social network was valued at a staggering $104.2 billion (bigger than all but 2 companies in the S&P 500 and the largest IPO in US history). The event however turned into something of a debacle given the IPO was delayed by around 30 minutes as traders were still filing orders. The stock opened up around 10-13% higher at around $42, with many considering this a disappointment given the hype around the event and the small amount of stock on offer that was always naturally going to increase demand at the open. Shares did however drift lower to the IPO price at the time of writing.
The FTSE100 lost a further 1.33% today, closing at 5268 taking the weekly loss to 5.5%, a similar if not slightly worse performance than its major European peers. Lloyds and RBS were at the bottom of the index at the close with 6.15 and 5.1% losses respectively, taking the total weekly fall for Lloyds to around 15%.