London’s banking stocks brushed off news of Moody’s downgrade to credit ratings across the global sector on Friday, making up opening losses to rally in afternoon trade.
HSBC was 0.5 per cent higher at 562.1p after it defied expectations for a two-notch downgrade ahead of the long-awaited announcement to receive only a one-notch cut.
Barclays was downgraded by two notches but its stock rose 0.6 per cent to 203.6p as traders doubted the news would have much significant market impact.
Royal Bank of Scotland, which received a one-notch downgrade, gained 0.7 per cent to 245.1p, off a session low over the morning which took it to 234.27p. RBS, which faces the prospect of having to post £9bn in collateral after the cut, hit back over Moody’s decision, saying it was “backward looking”.
Nonetheless, Moody’s action leaves the affected companies likely to face increased funding costs in the already stressed capital markets, which prompted the long-awaited review in the first place. It was significant enough to remind traders of the fragility of the recovery in the sector.
But reaction in dealing rooms and among analysts became more sanguine as the session developed.
“The credit rating downgrades by Moody’s had been anticipated for some time, while the scale of the downgrades put through were in line with market expectations,” said Gary Greenwood, analyst at Shore Capital, which left its rating on the sector at “neutral”.
“The recent announcement by the Treasury and the Bank of England to introduce two new government-backed funding schemes for UK banks at relatively low interest rates, should help mitigate the impact that the Moody’s downgrade will have,” added Mr Greenwood.
“We do not think these downgrades by Moody’s will have a material impact on UK bank funding costs or lending capacity.”
Lloyds Banking Group, which was not included in the action aimed at banks with major capital market operations, saw its shares rise 1.7 per cent to 31.7p. Standard Chartered fell 0.7 per cent to £14.
Persistent worries about the outlook for global growth after weak Chinese data meant resource stocks remained the biggest fallers on the FTSE 100, which lost 0.7 per cent overall to 5,524.18, a fall of 42 points.
Those concerns, combined with the lacklustre response to the Federal Reserve’s attempt to extend the reach of its existing stimulus measures without adding to its budget, pushed resource stocks to the bottom of the market as traders shunned risk.
Vedanta Resources, the copper miner, was the biggest single faller, down 3.2 per cent at 900p.
Petrofac, the oil and gas services company, lost 3.1 per cent to £13.92.
Six of the 10 biggest fallers on London’s benchmark index were in the resource sector.

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