FTSE flat as rising banks counter weak pharmas

By Tricia Wright

LONDON (BestGrowthStock) – Britain’s top share index was flat at midday on Monday, as investors put the European stress tests behind them to bid up banking stocks, while GlaxoSmithKline led heavyweight drugmakers down.

At 1106 GMT the FTSE 100 (.FTSE: ) index had inched up 1.16 points to 5,313.78, having closed 1.19 points lower on Friday.

Banks bounced back after declines on Friday, after the European bank stress tests unearthed no nasty surprises.

Barclays (BARC.L: ) did best, adding 2.1 percent, with Lloyds Banking Group (LLOY.L: ) and Royal Bank of Scotland (RBS.L: ) up 1.7 percent and 1.6 percent, respectively.

“(The market’s) had a really good start to the third quarter … a large part of which has been anticipation of a successful outcome to the European bank stress tests,” said Jim Wood-Smith, head of research at Williams de Broe.

“Now that we’ve got there, the market’s having a deep breath,” he said.

Only seven of 91 banks — five small Spanish banks, Germany’s state-rescued Hypo Real Estate (HRXGe.UL: ) and Greece’s ATEbank (AGBr.AT: ) — failed the tests, with an overall capital shortfall of just 3.5 billion euros ($4.5 billion).

The shortfall was much smaller than the 30-100 billion euros predicted by markets, though many European banks had already raised capital during the financial crisis, and there remained some skepticism that the stress tests on European banks were not strict enough.

Oil major BP (BP.L: ) was in demand, adding 2.1 percent, with the company expected to announce changes at the top on Monday, a day ahead of its second-quarter results, with the anticipated departure of CEO Tony Hayward, who has been under heavy fire for his handling of the massive oil spill in the Gulf of Mexico.

Tullow Oil (TLW.L: ) was the biggest blue-chip riser, up 4.2 percent, after the oil explorer said it had found a major new oil field off the coast of Ghana, raising hopes of further discoveries off West Africa.

Pearson (PSON.L: ) was another strong gainer, up 3.6 percent after the educational technology provider and Financial Times owner firmed up its full-year outlook after a strong first-half showing from all its units.

GLAXO WEIGHS

GlaxoSmithKline (GSK.L: ) fell 2.4 percent, topping the FTSE 100 fallers’ list, after the Wall Street Journal on Sunday reported that the drugmaker made a “very casual approach” to Genzyme Corp (GENZ.O: ), asking to be notified if Genzyme put itself on the block.

Peer AstraZeneca (AZN.L: ) was also weak, losing 1.4 percent ahead of its second-quarter results due later this week.

Consumer products group Reckitt Benckiser (RB.L: ) shed 0.7 percent after the release of its second-quarter results, with the stock having put in a good performance ahead of the numbers following last week’s takeover move for SSL International (SSL.L: ).

On the second line, Connaught (CNT.L: ) plunged over 80 percent, topping the FTSE 250 (.FTMC: ) fallers’ board, as the beleaguered social housing group said its net debt levels would be significantly in excess of previously advised levels and would breach its banking covenants.

On the economic front, house prices in England and Wales fell for the first time in 15 months in July, causing the annual rate to weaken for the first time in over a year, property data company Hometrack said on Monday.

U.S. stock futures (.DJc1: ) were a touch lower, indicating a slightly lower start on Wall Street, with investors awaiting June U.S. new home sales, due at 1400 GMT. Chicago’s Fed index is scheduled for release at 1230 GMT.

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(Editing by Will Waterman)

FTSE flat as rising banks counter weak pharmas