Ftse 100 skids below 6,800 as oil prices fall sharply after surprise build in us crude inventories

Shares in HSBC climbed towards the top of the blue chip index after analysts in the City said the case for a breakup of the bank has rarely been stronger.

Deutsche Bank revised HSBC’s target price to 525p from 514p and reiterated its “hold” rating as it questioned the viability of the FTSE 100 company’s structure.

The German bank believes HSBC stands to benefit from being broken up, as the costs of running a global HSBC seem to outweigh the benefits. Definition of currency depreciation Nevertheless, Deutsche Bank said it’s hard to imagine the company’s shares outperforming its peers “with cleaner and less complex business models”.

Looking at the cost of “being HSBC”, analysts highlighted two clear costs which they think will remain “a considerable drag on group returns” – capital trapped in subsidiaries making sub-par returns and central costs.

As such, analysts at Deutsche Bank said: “We struggle to think of a time in recent history when the case for a breakup of HSBC has been stronger.” In its wake, shares climbed 6.8p, or 1.2pc, to 564.3p.

Separately, Citigroup revised the price targets of Barclays, Lloyds and Royal Bank of Scotland upwards, but reiterated “sell” ratings on all three banking stocks. Definition of devaluation of currency Barclays closed up 3.1p at 172.3p, Lloyds rose 0.5p to 59.4p and Royal Bank of Scotland advanced 1.4p to 201.5p.

Traders also said a report in Germany’s Manager Magazin purporting that Deutsche Bank had considered a merger with Commerzbank was also responsible for increased demand in banking stocks.

Despite delivering half-year adjusted earnings before interest, tax, depreciation and amortisation of £11.5m – up 35pc year-on-year – it wasn’t a great session for The Gym Group. Currency depreciation definition economics Shares fell 19.5p to 210p.

Finally, despite ending the trading session at the top of the blue chip index, Berkeley Group was forced out of the FTSE 100 in the latest quarterly reshuffle to make for gold miner Polymetal International. Tradable currency definition GVC Holdings and Hunting were promoted to the FTSE 250, while Pendragon and Circassia Pharmaceuticals were booted out of the mid-cap index. Common currency definition All changes will take effect from the start of trading on September 19.

Housebuilder Berkeley Group has been demoted from the FTSE 100 in the latest quarterly review, while GVC Holdings has been promoted to the mid-cap index.

The decision was made using yesterday’s closing prices and all constituent changes will be applied after the close of business on Friday, 16 September and will be effective on Monday, 19 September 2016.

Joshua Mahony, of IG, said: “Yet again it has been the weekly EIA oil figures that have sparked this market back into life. Currency converter definition This week’s rise of 2.3 million barrels was almost as large as the preceding week’s increase in stockpiles, putting fresh downward pressure on crude oil and taking stock markets with it. Currency future definition The ghost of oversupply has not been laid to rest, indeed it seems to be returning with a vengeance. Definition of currency appreciation A rising US dollar and falling oil prices would potentially be a dangerous combination, threatening to unwind the gains made in equity markets over the summer. Currency valuation definition OPEC needs to do something, and quickly, but given their inability to reach a compromise, any action is still unlikely.”

Ryanair, which was a vocal campaigner against Brexit, has warned it will fly five million fewer seats to and from the UK next year as its growth in the country slows dramatically in the wake of the vote to leave the EU.

Michael O’Leary, the outspoken chief executive of the Irish budget airline, had cautioned before the referendum that the carrier would cut investment in the UK in the event of a Brexit result. Denominated currency definition The airline forecast today that its capacity and traffic growth in Britain will slow to about 6pc in the 12 months to March 2018, down from an expected 15pc this year.

“We trade a log of paper and derivatives which are eurozone or EU paper, and although we are passported into the UK and the UK authorities are very keen for us to continue to passport in, our clients might take us back into the EU because they may demand we transact with them through an EU entity.”

Much of the impact of the referendum would also be felt across the rest of the EU, Mr Cryan said, which should “re-engage with the people of Europe and consider what the institutions of the EU should be to serve the people of Europe in the 21st century. Economic definition of currency Maybe some reform is required to make it more relevant to today.”

Craig Erlam, of OANDA, reckons a strong US jobs report on Friday may force investors to consider the possibility that the Fed will raise rates next month.

“Two excellent jobs reports in June and July have put a rate hike this year well and truly back on the table but it would seem that investors want at least one more in order to be convinced. What is currency exchange definition While December may now be marginally priced in for a hike, a weak jobs report could quickly change that. Currency exchange market definition Equally, with September only 24pc priced in, another strong report will be very difficult to ignore and we could see some serious repricing ahead of the meeting in three weeks’ time.

“Additional quantitative easing in the form of an interest rate cut or larger debt purchases seems unlikely at this point, but we do expect the ECB to give a strong indication that the current bond purchasing program will be extended, probably by at least another 6 months. Foreign currency transaction definition This would be justified by the low inflation but also the need to support the debt markets ahead of potential risks in the form of the various referendums and elections that will take place in the Eurozone over the next 12 months. Currency volatility definition As such we believe that the search for both “yield” and “growth” will continue to be two very important themes in Europe.”

Chris Beauchamp, Chief Market Analyst at IG, said: “It doesn’t look like being a particularly exciting end to the month for markets, but then compared to previous Augusts this one has been remarkably free of volatility. Definition of currency crisis With so much emphasis having been placed on Friday’s NFP data, many traders will have decided to take the preceding days off, in a similar fashion to last week and Janet Yellen’s speech at Jackson Hole.”

Eurozone inflation was stable in August, against expectations of a slight rise, as food, industrial good and services prices increased by less than in July, piling more pressure on the European Central Bank to act.

Inflation in the 19 countries sharing the euro was 0.2 percent, the same rate as in July, EU’s statistics agency Eurostat said on Wednesday in its first estimate.

Robert Gardner, Nationwide’s chief economist, said: “The pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months.

“New buyer enquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. Definition of functional currency The number of mortgages approved for house purchase fell to an eighteen-month low in July.

“However, the decline in demand appears to have been matched by weakness on the supply side of the market. Fx exposure definition Surveyors report that instructions to sell have also declined and the stock of properties on the market remains close to thirty-year lows. Legal definition of currency This helps to explain why the pace of house price growth has remained broadly stable.

Although August can be a quiet month on the markets, it is generally considered a volatile month – who can forget China’s Black Monday last year on August 24, which caused the blue chip index to fall 6.7pc.

Rebecca O’Keeffe, of Interactive Investor, notes that “traditional August volatility has been missing this year as muted volumes and the continuing yield hunt has seen equity markets continue to benefit as investors struggle to find alternative investment opportunities.”

After UK consumer confidence rebounded modestly in August, with the headline index rising to -7 from -12 in July, Andrzej Szczepaniak, of Barclays, said:

“The modest rise in August consumer confidence is likely to reflect some post-referendum relief on the back of a modicum of political certainty seen since the referendum outcome, as well as the Bank of England policy measures announced since.”

However, Szczepaniak highlighted that the survey responses in July were collated during the first two weeks of the month and so unlikely reflect the appointment of Theresa May as Prime Minister.

“While material uncertainty remains, the modest rise in confidence suggests that households do not expect a ‘worst case’ scenario. Currency definition economics That said, lower confidence with respect to before the vote remains broadly consistent with our macro scenario of consumer spending slowing materially but gradually next year.”

The GfK composite index of consumer confidence rose to -7 in August from -12 in July, slightly above the consensus, -8, but Samuel Tombs, of Pantheon Macroeconomics, said that it is only a partial recovery and shows that “consumer sentiment has been dealt a lasting blow by the EU referendum”.

“The improvement in GfK’s index chiefly reflected a pick-up in the balance referring to optimism in the economic outlook to -22, from -33 in July, although the balance referring to households’ optimism about their own finances also rose to +4, from -1. Us currency definition The looming real income squeeze, however, as inflation picks up and job growth moderates, likely will weigh on consumer sentiment over the next six months and lead to a sharp slowdown in household spending growth.

The relationship between consumer confidence and spending has slackened over the last few years, though, suggesting we should not place too much weight on specific numbers.”

Consumer confidence bounced back in August as households ditched plans to save and carried on spending following the decision to leave the European Union.

GfK’s latest confidence barometer for August showed Britons were more confident about splashing out on big ticket items such as fridges and TVs as optimism recovered after the initial shock of the Brexit vote.

All five measures used to calculate GfK’s index, including confidence about personal finances and the wider economy, rose in August, following the biggest collapse in optimism for 26 years in July.

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