Market report: RBS rally is stymied after worries over US crisis fine

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Fears that Royal Bank of Scotland will need even deeper pockets to pay for its part in the financial crisis put the brakes on its recent rally.

Shares in RBS, still majority owned by the taxpayer, have soared by a third since October, with increasing optimism about the UK economy after Brexit which initially caused RBS shares to dive.

The recovery since then has also been fuelled by hopes of a lighter fine from the US Department of Justice over selling mortgage-backed securities which triggered the global financial collapse in 2008.

Investors, though, are starting to get nervy as the DoJ prepares to deliver its verdict. Today, shares in RBS fell 4.5p, or 2%, to 222.9p on expectations of a huge bill. Reports suggested a $10 billion fine would be a good result.

Deutsche Bank, which was also involved in selling the toxic mortgage securities, agreed to settle with the DoJ for $7.2 billion just before Christmas, although RBS had a bigger share of the market than its German rival.

Shares in Barclays, which is taking the matter to court, were off 3.65p, or 1.6%, at 230.4p, while other banks were less affected.

The FTSE 100 continued its relentless march higher, climbing 15.41 points to yet another record high of 7253.18. Miners and supermarket shares led the charge as the index headed for its 11th consecutive day of gains and its ninth straight session of record highs.

Costa Coffee and Premier Inn owner Whitbread was among the winners. The shares rose 115p, or 3%, to 3980p as Credit Suisse upgraded the company to outperform, arguing that its planned £150 million of cost savings would help to offset the rise in the UK’s minimum wage.

PureCircle jumped 24.02p, or 8.5%, to 306.02p as the US customs released two shipments of its stevia sweetener that were seized as part of an investigation into forced labour. 

Today’s recovery leaves the shares higher than they were before last week’s nosedive that was caused by a profit warning related to the US seizure.

On AIM, Satellite Solutions Worldwide, the rural broadband firm backed by Nick Candy, drifted 0.13p lower to 9.25p after yesterday’s rise which was inspired by a tip in an investment magazine.

It was full speed ahead for Science in Sport, which raced 2.98p higher to 81.48p after it was revealed as the official sponsor of the British cycling team until the Tokyo Olympics in 2020, providing nutrition for cyclists including gold medallists Jason and Laura Kenny.

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January 11, 2017 |
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