Wednesday, 7 December 2016

Britain's mid-caps lag FTSE as spreadbetters tumble

Britain's mid-caps underperformed blue-chip peers on Tuesday, as spreadbetting firms' stocks tumbled after regulators announced a planned crackdown on some of their products.

Britain's financial watchdog proposed tougher rules for retail financial spread betting products known as "contracts for difference" (CFDs) after finding that 82 percent of customers using them lost money.

Mid-caps CMC Markets and IG Group  both dropped more than 37 percent, while Plus500 fell 28 percent.

"This is negative – period - and CMC Markets and IG Group – the two that operate to the highest standards in the industry in our opinion – are collateral damage," RBS analysts said in a note.

The British mid-cap FTSE 250 .FTMC was down 0.1 percent, while the FTSE 100 .FTSE was up 0.5 percent at its close.

The blue chips were supported by a rally in bank stocks. Royal Bank of Scotland, Barclays ( and HSBC  were the top gainers on the index, all up between 4.4 to 5.7 percent.

Traders cited Morgan Stanley's upgrade on HSBC to "equal-weight" from "underweight".

"Our key concerns – necessity for capital build and tepid revenue outlook – are dissipating," analysts at Morgan Stanley said in a note, adding that, if HSBC's revenue growth was to pick up, the stock could do well.

The mining and oil sectors, however, were among the biggest weights on the FTSE 100, as copper and Brent crude prices eased back.

Oil prices retreated as crude output rose in virtually every major export region despite plans by OPEC and Russia to cut production, triggering fears that a fuel glut that has dogged markets for more than two years might last well into 2017.

Meanwhile, strong month-long rallies for industrial equipment hire company Ashtead  and heating and plumbing supplier Wolseley stalled.

Ashtead was up just 1 percent, despite early gains on the back of results at the upper end of expectations, and Wolseley gained only 0.9 percent after forecasting annual profit in line with expectations.

Both sets of results were accompanied by bullish statements on the strength of U.S. growth, a factor investors have already priced in.

The stocks are up 28 percent and 14 percent respectively from lows touched after the election of Donald Trump as U.S. president, having rallied strongly on hopes of an increase in U.S. infrastructure spending.

Mid-cap Drax  surged more than 12 percent after it said it plans to buy Opus Energy for 340 million pounds.

Reference: Alistair Smout and Kit Rees

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