An upbeat note from Goldman Sachs boosted the banking sector today and helped limit losses for London’s leading shares index.
The US broker upgraded its rating for the European banking sector and added that it now expects the FTSE 100 Index to hit 6,200 in six months’ time, up from its previous estimate of 6,000.
But with Spain sparking more fears about the eurozone debt crisis after admitting it will miss deficit reduction targets this year, London’s blue chip shares index fell 20.1 points to 5911.1.
The Dow Jones Industrial Average was 0.2% down as the London market closed, leaving it on track to finish the week lower after two weeks of gains.
Stronger than expected growth in the construction sector supported the pound, which was up against the euro at 1.20, but it was down against the dollar at 1.59.
The note from Goldman said recent moves by the European Central Bank to pump more than £800bn into the banking sector had improved its prospects.
Shares in a clutch of UK banks improved, with Royal Bank of Scotland up 0.3p to 28p and Lloyds Banking Group ahead 0.9p to 35.6p.
Analysts were also comfortable with the revelation from Barclays that it tapped €8.2bn of the ECB’s cheap loans this week.
It is using the money to “provide funding stability” for its operations in Spain and Portugal, whose economies are suffering amid the eurozone crisis.
Shares were 5.6p higher at 256.8p, while HSBC added 0.7p to 569p.
Hedge fund manager Man was near the top of the risers board as the recent signs of improved trading shown in yesterday’s full-year results boosted shares for a second successive session. The stock was 5p higher at 152.5p, up 3%.
Other stocks on the front foot included engineering firm IMI, which impressed the City by announcing a bigger-than-expected 19% rise in full-year profits to £363.4m for 2011.
The Birmingham-based company, which is focused on the control and movement of fluids in critical applications, has benefited from demand in emerging markets. Its shares were 21p higher at 991p, a rise of 2%, helping it rebuild value after a slump in its shares last summer.
The biggest faller in the top flight was miner Kazakhmys, which declined 62p to 1000p after Societe Generale removed its buy rating on the stock.
Outside the top flight, shares in Rentokil Initial were 6% lower after it announced further dismal trading at its City Link parcels delivery arm.
Losses for the division increased 86% to £6.7m and overshadowed improved trading elsewhere at Rentokil as the pest control and washroom firm resumed dividends with a pay-out of 1.33p a share.
With analysts cutting their forecasts due to City Link’s protracted turnaround effort, the FTSE 250 Index stock was 4.5p lower at 76p.
The biggest Footsie risers were International Power up 15.4p at 365.5p, Essar Energy ahead 4.4p at 113.8p, Man Group up 5p at 152.5p and International Consolidated Airlines ahead 4.5p at 167.3p.
The biggest Footsie fallers were Kazakhmys down 62p at 1000p, Admiral off 37p at 1059p, Experian down 23p at 932.5p, and GKN off 4.1p at 218.4p.