RBS reveals ring-fencing strategy, IG to take hold of DailyFX

London open

The FTSE 100 is expected to open 56 points lower on Friday, after closing up 1.02% at 6,919.42 on Thursday.

Stocks to watch

Royal Bank of Scotland Group announced its proposals to regroup its businesses and separate its essential banking services from investment banking, in order to comply with UK ring-fencing legislation, on Friday. The FTSE 100 company said it will transfer most of its existing private, business and commercial customers from RBS plc to its current Scottish private bank Adam & Company in mid-2018, renaming it The Royal Bank of Scotland plc. At the same time, RBS plc will be renamed NatWest Markets plc and continue to operate its CIB businesses.

IG Group has agreed to buy global news and research portal DailyFX and its associated assets from FXCM Inc for a total consideration of $40m. IG said the deal, which is expected to complete by the end of October, is part of its aim of becoming the default choice for active traders globally. The company said this transaction will “significantly enhance” its ability to acquire new clients and to engage with and improve the retention rates of its current clients.

FTSE 250 listed residential landlord Grainger is to buy a private sector build-to-rent development on the former Yorkshire Post gateway site from YP Real Estate for £40m.The development is expected to be completed in 2019 and once the properties are fully let it is anticipated to have an annual return on investment of about 7%.

Newspaper round-up

The US Department of Justice hopes to agree an omnibus settlement with Barclays, Credit Suisse and Deutsche Bank, extracting multibillion dollar fines from three of Europe’s biggest lenders for mis-selling mortgage securities. By grouping the three banks together into a single deal the DoJ hopes to achieve maximum public impact by collecting an eye-catching sum in penalties from the trio just weeks before the US presidential election. – Financial Times

Hedge funds have started to pull some of their business from Deutsche Bank, setting up a potential showdown with German authorities over the future of the country’s largest lender. As its shares fell sharply in New York trading, Deutsche recirculated a statement emphasising its strong financial position. – Financial Times

What’s going on with the banking industry? Since the credit crunch in 2008, banks have been struggling to adapt to their new environment. Low interest rates coupled with meagre yields in the financial markets mean banks can generate fewer profits from the deposits they collect, the loans they dole out, and the market services they provide. While government schemes such as Funding for Lending have propped up some of the banks’ operations, they have dampened activity in other areas, for example by subduing market volatility with vast quantitative easing programmes. – Telegraph

Consumer confidence bounced-back to pre-EU referendum levels in September as households shrugged off Brexit jitters and continued to spend.All five measures used to compile GfK’s closely-watched confidence index climbed this month, including a jump in optimism about the economy and consumers’ willingness to spend on big ticket items such as fridges and televisions. – Telegraph

The UK has signed its £18bn contract with France and China to build the Hinkley Point C nuclear power station, giving the final go-ahead for construction at the site in Somerset.The deal was finalised at a low-key ceremony in London, just two months after Theresa May alarmed her French and Chinese counterparts by putting the entire project under review. EDF, the French nuclear contractor, and its Chinese partners had to cancel their previous plans for a signing ceremony at the last minute when the review was announced in July. – Guardian

A slump in home ownership and less generous pensions have left those born in the early 1980s with only half the wealth of those born a decade earlier by the same stage of their lives. In fresh evidence of the UK’s growing inter-generational divide, the Institute for Fiscal Studies (IFS) has reported that people in their early 30s had average net household wealth of £27,000 from equity in their homes, the value of their pensions and other financial investments. – Guardian

Landlords will face tougher stress tests from mortgage lenders next year as the Bank of England attempts to bring the booming buy-to-let sector into line with the rest of the housing market. For the first time, the Bank’s Prudential Regulation Authority has implemented regulations that a landlord must meet to be given a mortgage. – The Times

US close

US stocks ended in the red on Thursday amid growing concerns about Deutsche Bank and the broader financial sector.

The Dow Jones Industrial Average closed down 1.1%, while the S&P 500 and the Nasdaq fell 0.9%.

Worries about the banking sector undermined sentiment, with US-listed shares of Deutsche Bank tumbling amid reports that a number of key funds have cut their exposure to the German lender, which is currently facing a $14bn fine from the US Department of Justice for mis-selling mortgage-backed securities.

Shares in the bank have been under the pressure this week amid fears that the fine could lead to its collapse.

Meanwhile, oil prices settled higher following a choppy session despite analysts expressing caution over the outcome of the OPEC meeting.

During a meeting in Algeria on Wednesday, ministers agreed to cut production to between 32.5m and 33m barrels a day, down from August output levels of 33.5m barrels.

Further details of the agreement will be discussed at the next meeting on 30 November.

West Texas Intermediate was up 1.5% to $47.73 a barrel and Brent crude was up 0.8% at $48.10.

Ranko Berich, head of market analysis at Monex Europe, said: “OPEC’s agreement to cut production came as a complete surprise to markets last night, but it’s interesting that Brent has failed to breach the $50/barrel level that has acted as resistance in recent months.

“It’s also worth noting that USD, which was influenced heavily by the initial 2014 falls in crude oil prices, did not weaken noticeably on yesterday’s events. It appears that market participants remain sceptical of OPEC’s mettle, and if the cuts announced will be sufficient to clear the current supply glut in crude.”