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Bank stocks collapsed as storm clouds gathered over the UK economy.
Lloyds fell 5.8 percent or 2.4p to 39.09p, while Barclays fell 3.2 percent or 4.48p to 135.68p and NatWest fell 4.2 percent or 9.2p to 212.4p amid mounting fears where the UK is heading. recession just as the turmoil in the financial markets is a threat to financial stability.
The mood was not favourable, as official figures showed the UK economy shrank by 0.3 percent in August.
Recession fears: Lloyds fell 5.8%, while Barclays fell 3.2% and NatWest fell 4.2% amid financial market turmoil
“There is an unfavorable external headwind blowing, hampering the UK’s ability to grow its economy,” said Hargreaves Lansdown analyst Sophie-Lund Yates.
Shore Capital analyst Gary Greenwood warned banks are being hit by a cocktail of woes, including the pension crisis caused by liability-driven investments (LDIs).
He said: “The recent disruption in government bond markets as a result of the LDI issuance has also raised concerns about financial stability.
The market is concerned about what this could mean for bad debts and thus the solvency of banks.
The concerns have been greatly exaggerated and banks are entering this downturn in very good shape after years of stricter regulation and a period of relatively subdued loan portfolio growth.’
The FTSE 100 fell 0.86 percent or 59.08 points to 6826.15 and the FTSE 250 fell 1.73 percent or 292.90 points to 16,611.16.
Energy stocks fell amid reports of an impending windfall tax that would limit the money of wind, solar and nuclear producers.
Drax fell 2.5 percent, or 13p, to 511.5p, SSE fell 2 percent, or 28.5p, to 1428p, Centrica fell 1 percent, or 0.68p, to 68.68p and National Grid fell 2.9 percent , or 25.4pp, to 858.4p.
Drax boss Will Gardiner said it would work with the government and industry to smooth over proposals for a temporary cap on revenue.
Fracking stocks also took a hit as MPs sought ways to change the government’s plan to lift the ban on onshore drilling for shale gas.
Egdon Resources plunged 16.7 percent, or 0.8p, to 4p, while Igas Energy fell 10.2hp or 5.4p to 47.6p.
Deutsche Bank emphasized jitters toward gambling stocks and lowered the price target of Entain, the owner of Ladbrokes and Coral. Online betting group 888 was reduced to 160p from 230p.
While Deutsche issued a “buy” rating for both, Entain fell 0.9 percent or 9.5p to 1088.5p, while 888 fell 3.5 percent or 3.2p to 87.3p.
Chemicals group Synthomer fell 7.8 percent, or 7.55p, to 88.85p as it paid the price for suspending dividends until the end of next year.
Tullow Oil fell 6.6 percent or 2.72 pence to 38.38 pence after broker Jefferies downgraded its rating from “buy” to “hold” and lowered its price target from 77p to 48p.
Hostelworld gave its investors a reason to cheer as the online travel agency expects to go from loss to profit this year. Shares were up 0.1 percent, or 0.1p, to 76p.
Mike Ashley took another step in expanding his empire when Sports Direct owner Frasers Group announced a 4.5 percent stake in N Brown.
But Jefferies cut N Brown’s share price from 30p from 30p to 25p, as the retailer’s shares fell 6.6 percent or 1.55p to 22p.
Marston’s fell 3.9 percent, or 1.48p, to 36.5p. Liberum issued a ‘buy’ advice as the brewer is in ‘deep value’ even despite mounting economic pressures, while JP Morgan reiterated a ‘neutral’ advice and cut the target price to 54p from 59p.
Deepverge bottomed out, saying it was struggling to raise enough to repay a large loan and strengthen its balance sheet.
The company, which makes human-like skin for pharmaceutical companies to test products on, must repay its first loan on Sunday. Shares tumbled 44.9 percent, or 2.52p, to 3.1p.
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