Asian Open Copper Breaks Out Commodities Basket Rises to 4 year High

Barclays shares fell more than 6% on Tuesday as shareholders reacted to a bigger than expected £5.8bn rights issue and a deeper than forecast £2bn set aside for losses against claims for PPI and interest rate swap mis-selling.

Barclays had of course been expected to announce a cash call to shareholders as it seeks to plug a hole of as much as £7bn in its capital buffers to meet new and speed through leverage ratio thresholds by the Prudential Regulatory Authority (PRA). Speculation varied from a cash call of £4bn to as much as £7bn, with the market settling on a median rights issue of £5bn. As such, today’s announcement, which enables shareholders to buy 1 share for every 4 that they own at a discounted price of 185p, is bigger than expected. Barclays will also convert £2bn worth of bonds into equity.

The UK bank also set aside an additional £1.35bn to compensate for claims of mis-selling PPI, meaning PPI claims have now cost the bank £4bn. An extra £65mn was set aside for claims of mis-selling interest rate swaps as a form of hedging insurance.

Barclays reported an adjusted profit before tax of £3.59bn, which marks a deeper than expected fall in profits of 17%, which had been expected to come in at £3.7bn.

The half yearly earnings from Barclays dampens sentiment for the broader banking sector ahead of earnings from Lloyds (Thursday) and RBS (Friday), whose shares have slumped as a result today by between 1.5% and 2.5%. There are now heightened expectations that both will report additional provisions for mis-selling claims.

What today’s cash call from Barclays does show is the vigour at which the PRA has shown to get UK banks’ finances in order. Having permitted an extension to Nationwide to the end of 2015 to meet the 3% leverage threshold, their stance with Barclays in forcing it to raise cash now shows the strong hand with which it will deal with the largest UK banks that pose the biggest risk.

Such was the activity in Barclays shares after the rights issue news that it took more than 5 minutes to find a weighted price at the market open. Shares opened lower by as much as 6% to a low of 292p, its lowest level since early July.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Products and services available depend on your location and the entity holding your account. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.