Banks struggle amid State bailout fears for Italian lender BMPS

Banks struggle amid State bailout fears for Italian lender BMPS

European banks struggled to make gains on Thursday as investors digested the prospect of a state bailout for struggling Italian lender Banca Monte dei Paschi di Siena (BMPS).

The FTSE 100 was trading lower by 0.1% at around 7,034 points, dragged down by the likes of Barclays, which was down 0.6%, and Lloyds Banking Group and HSBC which were each down 0.3%.

The banking sector was feeling the knock-on effects of a rollercoaster ride in BMPS shares, which were suspended after plunging 6% following the market opening, but were trading higher by 2.5% hours later.

The world's oldest bank saw its shares plunge 17% a day earlier after warning it could run out of cash within four months if it failed to secure fresh capital.

But Italian legislators have since approved a 20 billion euro (£16.9 billion) rescue plan for some of the country's weakest banks, including BMPS

Connor Campbell, a financial analyst at SpreadEx, said the bank was "rapidly running out of time" to raise the 5 billion euros (£4.2 billion) it "desperately needs".

"It's only managed 2 billion euros so far, with a key Qatari investor choosing not to invest a 1 billion euro chunk - it looks like MPS will be forced into a government bailout."

Italy's FTSE MIB was higher by 0.5%, while the French Cac 40 was up 0.1%, and the German Dax was flat.

Sterling dipped 0.35% to a two-week low against the euro at 1.180, and dropped 0.1% against the US dollar to 1.233.

That is despite slightly better-than-expected UK consumer confidence figures, with the GfK index coming in at minus 7 for December despite expectations for minus 9.

Meanwhile, the latest survey from the Confederation of British Industry (CBI) showed that private sector growth hit a one-year high thanks to a pick-up in manufacturing activity, but warned of a "significant" slowdown in the year ahead.

In oil markets, Brent crude was down 0.2% at 54.30 US dollars (£44.01) per barrel after data showed that US crude inventories rose more than expected last week.

In UK stocks, London-listed Indian online fashion retailer Koovs fell 7.6% as the company reported a £9.1 million half-year loss compared with £5.7 million last year.

Koovs said the loss was expected as it continues to increase investment in marketing and technology.

Shares in HSS Hire rose 0.9% after the tool supplier said it would raise £13 million through a share sale to strengthen its balance sheet and fund investment.

The firm, which was forced to issue a profit warning last month, is in the middle of a transformation programme which will see the integration of a new national distribution and engineering centre.

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