FTSE 100 falls as Lloyds posts big loss

Britain's top share index closed slightly lower on Friday after Lloyds Banking Group reported a huge full-year loss, while oil-related stocks firmed as oil prices remained near recent highs on global supply issues. London's blue chip index closed down 2.76 points, or 0.1 percent, at 5,935.13.
Part state-owned British bank Lloyds, down 2.3 percent, was forced to push back key targets of its turnaround plan and warned a tough economic outlook would hit revenue after plunging to a 3.5 billion pound ($5.5 billion) yearly loss. Lloyds' results came a day after Royal Bank of Scotland, down 0.7 percent, reported its fourth straight annual loss.
The banking sector is up about 22 percent in 2012, supported by central banks stepping in to prop up the financial system, but Barclays Capital turned bearish on European banks, downgrading them to "underweight" ahead of the second tranche of the European Central Bank's long-term refinancing operation (LTRO) next week.
"We think the (LTRO) news has already been priced in ... In addition, risks from deleveraging, regulatory reform and earnings downgrades remain, while valuations are in line with historical periods of low profitability," BarCap said. Concerns over its profit outlook continued to dent mobile telecoms firm Vodafone. Its shares have fallen more than 2 percent since Credit Suisse cut forecasts on Wednesday, which was followed the day after by a profit warning from Deutsche Telekom.
Consumer products firms were weaker after US peer Procter & Gamble overnight trimmed forecasts for the current quarter and announced massive job cuts. Anglo-Dutch Unilever shed 1.9 percent, while Reckitt Benckiser fell 2.3 percent as Goldman Sachs downgraded its rating to "neutral" from "buy" and cut earnings forecasts for the group by up to 5 percent.
Vedanta Resources climbed 4.5 percent as Indian non-ferrous metals producer Sterlite Industries said its board will meet on Saturday to consider restructuring proposals, raising the possibility of a reported merger with sister company and iron ore miner Sesa Goa. Both firms are separately listed subsidiaries of Vedanta. RBC Capital said earlier in the week that a merger would be a positive move for Vedanta's corporate strategy and would help the company from a consolidation perspective.
Short interest in Vedanta's stock had risen sharply before the talk of restructuring and with the share price going higher traders said there was evidence of speculators covering their positions. Oil-related stocks were higher as Brent crude neared $124 a barrel on tensions in the Middle East. BP added 0.2 percent, while oil services firm AMEC climbed 3.2 percent.
Although there remains a potent threat from the long-term inflationary impact of high oil prices, Europe's debt problems and slowing China growth, the FTSE 100 is up 6.6 percent in 2012, but volumes remain light as big-money players remain unwilling to commit fresh capital to the rally.
"The market continues to signal a more positive outlook, despite the political backdrop, and is inviting investors to put more risk on the table," Oliver Wallin, investment director here at Octopus Investments. "We remain reluctant participants in this rally. Our portfolios are enjoying some of the upside but we are top slicing along the way and keeping a wary eye on the political stage," Wallin said.
Company earnings remained a prominent theme among market movers, with Hammerson rising 3.7 percent as the real estate developer accompanied above-forecast full-year results with plans to sell its entire office portfolio to focus on retail property in Britain and France.
Berendsen gained 8.2 percent after the textile services firm posted a better-than-expected profit and said it expects to deliver a better performance in 2012. Capita rose 4.1 percent, extending Thursday's post-results advance, as Oriel Securities raised its rating on the firm to "hold" from "reduce", while Deutsche Bank and Barclays Capital both lifted target prices for the outsourcing group. Logica too received a post-results boost, up 7.5 percent as Goldman Sachs, Barclays Capital and UBS raised target prices on the Anglo-Dutch IT services provider.