London markets lose early gains despite UK banks’ best efforts

A bumper crop of results from Britain’s largest lender and Asia-focused HSBC initially boosted London markets today, before an afternoon collapse.

The capital’s premier FTSE 100 index dropped 0.13 per cent to 7,413.42 points, while the domestically-focused mid-cap FTSE 250 index, which is more aligned with the health of the UK economy, added 0.22 per cent to reach 20,079.23 points.

Investors piled into London-listed banks after HSBC this morning said profits hit $9.2bn (£7.5bn) for the six months to June, down from last year but above analysts’ expectations.

Those results triggered a rally among bank stocks, with HSBC leading the way, closely followed by now privately-owned NatWest and Barclays.

However, those gains were cancelled out during the late afternoon session, with the FTSE 100 led lower by industrial giants tumbling.

Analysts said cooling concerns over the damage the inflation crunch will do to the global economy had lifted market sentiment.

“Solid earnings, easing around inflation worries and some repricing around the Fed, plus a weaker dollar, has enabled a strong bear market rally,” Neil Wilson, chief market analyst at Markets.com, said.

Wealth manager and FTSE 250-listed Quilter surged over 14 per cent after reports emerged over the weekend indicating NatWest is weighing up buying the firm.

The pound surged 0.9 per cent against the dollar to buy $1.2277 ahead of what may be the biggest rate rise in the Bank of England’s 25 years of independence on Thursday.

Yields on UK government debt jumped as investors price in that bigger rate rise.

Oil prices plummeted around five per cent on fears that demand will drop amid weakening global economic activity.