London midday: Stocks tick down as BoE orders banks to boost capital buffers

London stocks had ticked a touch lower by midday despite a solid showing in the mining sector, as investors mulled news that the Bank of England will force banks to bolster their capital buffers to deal with bad debts.

The FTSE 100 was down 0.1% to 7,442.71 as it emerged that banks will be made to set aside an extra £11.4bn in the next 18 months to protect themselves against bad loans.

In its Financial Stability Report, the BoE said there are pockets of risk that warrant vigilance. "Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. Lenders may be placing undue weight on the recent performance of loans in benign conditions."

It said that increasing the UK countercyclical capital buffer rate to 0.5% from 0% will raise regulatory buffers of common equity Tier 1 capital by £5.7bn. This will provide a buffer of capital that can be released quickly in the event of an adverse shock occurring that threatens to tighten lending conditions. The Bank expects to increase the rate further to 1% in November, bolstering reserves by another £5.7bn.

The pound briefly popped higher on the news and was trading up 0.2% at $1.2748 at midday. Against the euro, however, sterling was down 0.3% to 1.1342 after European Central Bank chief Mario Draghi said "a considerable degree" of stimulus is needed in the eurozone compared to a previous call for "very substantial" stimulus.

Oanda analyst Craig Erlam said: "While banks have one year to implement the change, it still represents a minor tightening in financial conditions which triggered the initial move in sterling, a move that was almost immediately fully reversed."

Elsewhere, the latest figures from the Confederation of British Industry showed sales volumes on the High Street perked up in June but were expected to stall again in July. The CBI's distributive trades index jumped from a reading of +2 for May to +12 in June, but was nevertheless lower than the print of +15 which economists had been expecting.

Meanwhile, the balance of retailers' expected sales volumes slipped from +6 in June to +3 for July.

The latest poll by YouGov released early on Tuesday revealed that consumer confidence in the UK fell sharply in the 12 days after the general election, hitting its lowest level since the aftermath of the Brexit vote.

Heavily-weighted mining stocks put in the strongest performance as China Premier Li Keqiang said the country - a big consumer of metals - is capable of achieving its full-year growth target. Also providing a boost was news that profit growth in China's industrial sector picked up in May.

Elsewhere, retailers were in focus as department store chain Debenhams and Carpetright updated the market.

Debenhams shares fell after it warned that full-year profits could be towards the lower end of the current range if market volatility continues, as it reported a drop in third-quarter like-for-like sales.

Carpetright fared a lot better, however, surging 8% as its full-year underlying pre-tax profit fell on the back of a weaker pound and the revamp of its stores, but still came in ahead of expectations.

LondonMetric Property slipped after saying it had sold its last remaining office asset in Marlow to Kildare Partners for £68.5m, while Petrofac reversed earlier gains to gush lower despite saying it has made a positive start to the year.

Builders' merchant Travis Perkins also reversed course to trade in the red after announcing the appointment of Stuart Chambers as its chairman with effect from November.

Pub operator Punch Taverns was in focus after the Competition and Markets Authority said there were reasonable grounds for believing that proposals made by Heineken might remedy its concerns over the brewer's acquisition of Punch.

Shares in vehicle hire firm Northgate tanked after it reported a drop in full-year pre-tax profits to £72.2m from £77.6m.

Market Movers

FTSE 100 (UKX) 7,442.71 -0.05%
FTSE 250 (MCX) 19,542.04 -0.72%
techMARK (TASX) 3,605.09 -0.54%

FTSE 100 - Risers

Anglo American (AAL) 1,004.50p 3.08%
Rio Tinto (RIO) 3,135.50p 2.57%
Antofagasta (ANTO) 769.50p 2.46%
BHP Billiton (BLT) 1,168.00p 2.28%
Glencore (GLEN) 283.30p 2.20%
Barclays (BARC) 203.55p 1.83%
Fresnillo (FRES) 1,581.00p 1.67%
Tesco (TSCO) 169.55p 1.65%
Standard Chartered (STAN) 753.90p 1.34%
Randgold Resources Ltd. (RRS) 7,080.00p 1.14%

FTSE 100 - Fallers

Compass Group (CPG) 1,661.00p -4.74%
TUI AG Reg Shs (DI) (TUI) 1,118.00p -2.78%
GKN (GKN) 336.70p -2.72%
Marks & Spencer Group (MKS) 336.50p -1.98%
Mediclinic International (MDC) 742.50p -1.92%
Persimmon (PSN) 2,234.00p -1.76%
Carnival (CCL) 5,135.00p -1.72%
Admiral Group (ADM) 2,009.00p -1.52%
easyJet (EZJ) 1,336.00p -1.47%
Babcock International Group (BAB) 896.50p -1.43%

FTSE 250 - Risers

Kaz Minerals (KAZ) 484.20p 2.85%
Ferrexpo (FXPO) 192.70p 2.39%
Vedanta Resources (VED) 601.50p 2.04%
Sirius Minerals (SXX) 32.96p 1.73%
Virgin Money Holdings (UK) (VM.) 270.50p 1.50%
Hunting (HTG) 475.40p 1.45%
TalkTalk Telecom Group (TALK) 177.90p 1.25%
Redefine International (RDI) 40.30p 0.98%
Fisher (James) & Sons (FSJ) 1,645.00p 0.73%
Booker Group (BOK) 185.10p 0.71%

FTSE 250 - Fallers

Northgate (NTG) 464.00p -12.78%
Nostrum Oil & Gas (NOG) 465.40p -3.62%
William Hill (WMH) 252.90p -3.62%
PayPoint (PAY) 900.50p -3.17%
Playtech (PTEC) 962.00p -3.17%
Polypipe Group (PLP) 391.10p -2.95%
AA (AA.) 218.00p -2.85%
IWG (IWG) 322.20p -2.42%
Hikma Pharmaceuticals (HIK) 1,554.00p -2.39%
Sports Direct International (SPD) 289.20p -2.33%