Lukewarm response to Abbey National takeover news

The London market switched into reverse gear today as investors failed to warm to the proposed takeover of banking group Abbey National.

A string of banking stocks were in the red after Abbey said it had accepted an offer worth around £8.5bn (€12.9bn) from Spanish bank Banco Santander Central Hispano.

By mid-morning the FTSE 100 Index was 19.4 points lower at 4306.9, despite moving into positive ground earlier in the session.

Abbey was the heaviest top flight faller, losing nearly 6% or 33.25p to 546.75p, after soaring 17% following the first announcement on Friday.

Other financial stocks following Abbey into the red included Barclays, off 11.5p to 438.5p, Lloyds TSB 6.5p lower at 398p and Alliance & Leicester weakening 15.5p to 827.5p.

Pharmaceuticals giant GlaxoSmithKline was also among the losers, retreating 5p to 1082p, as investors awaited tomorrow’s second quarter results announcement.

Mobile phone giant Vodafone was in the black, off 0.75p at 115.5p, after saying its customer base had reached 139.2 million despite tougher conditions in many of its markets. The news had cheered investors earlier in the session.

Those driving the market forward included British Land, up 12p to 705p, after it announced the appointment of Abbey National’s chief operating officer Stephen Hester as chief executive.

Household products group Reckitt Benckiser was 9p higher at 1474p after reporting growth across all its product categories in the first half and raising the bar on its annual revenues target.

Media company Pearson advanced 4p to 621.5p as it posted narrower losses at its Financial Times business and gave an upbeat view on its full-year prospects.

Outside the top flight, debt-laden Channel Tunnel operator Eurotunnel slipped 12% – or 2.75p to 19.75p – as it admitted its financial position was “worrying” after half-year losses ballooned to £82m (€124m).