Standard Chartered shares slump 18%, keeping leash on the FTSE

<p>Huge losses suffered in Standard Chartered shares proved to be a heavyweight drag on the FTSE 100, keeping a leash on gains for the UK […]</p>

Huge losses suffered in Standard Chartered shares proved to be a heavyweight drag on the FTSE 100, keeping a leash on gains for the UK Index, which was trading higher by 10pts going into the close.

Were it not for Standard Chartered shares suffering significant losses today, the FTSE 100 would have seen much higher prices today. Despite the drag from UK banks in the midst of the Standard Chartered scandal, another close above the 5800 level for the FTSE breeds confidence that the 5900 level remains in target.

The day however has been all about Standard Chartered. The banks’ shares closed down by 6% yesterday but with the news breaking very late, today has been the first real occasion where most traders in London could react, and they have reacted with severity, sending share prices to a 3yr low.

Not only are the allegations made at Standard Chartered a significant threat to the banks reputation, but it also creates uncertainty as to what the consequences could be and investors hate uncertainty. What’s more, the Barclays libor and HSBC money laundering scandals are very fresh in the memory, and so it was inevitable that the banks shares price would see heavy losses in today’s session, with investors moving to protect the value of their holdings.

That said, the banks’ shares price has seen somewhat of a recovery from much heavier early session lows, where the banks shares price touched a new 3yr low of 1092p. Since Friday’s close, the shares price has fallen 23%, with just under £9bn being wiped off the banks value. At one point today, that value was £11bn.

On the other hand to the woes of Standard Chartered Bank was InterContinental Hotels, which delighted shareholders by announcing it would return $1bn through a share buyback and special dividend. The group also reported an rise in half year profits of 6%. The news immediately lifted the hotel group’s shares price, which traded higher by 6% on the day.

Tomorrow marks the start of two days of intense economic data including the release of the Bank of England quarterly inflation report tomorrow and a raft of Chinese data including industrial production and inflation due out on Thursday morning. It is here where investors will likely gauge the next phase of the FTSE’s bullish turn in momentum.

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