Standard Chartered weighs on the FTSE

European markets stayed within a tight range in early trading on Tuesday as investors paused for breath following four-month highs in the previous session. The focus is still firmly on Standard Chartered following accusations yesterday by New York’s top financial regulator that Standard Chartered had hidden dealings with Iran, a claim that the bank rejects. Elsewhere a bullish sentiment seems to be underlying, although investors are just holding back to look for new catalysts to direct their trading decisions.

The FTSE is currently trading 0.2% lower, pulled down heavily by Standard Chartered. Elsewhere in Europe the DAX and the CAC have both gained over 0.5% as investors look towards the barrage of economic data due out this week to determine the markets near term direction.

With data due globally including US mortgage data, Chinese industrial production, inflation figures and retail sales, investors are conscious that weaker than expected figures could prompt central banks to launch more stimulus. UK June manufacturing posted a 2.9% monthly fall, the largest drop since November 2008, although this was partly due to the Queen’s Diamond Jubilee.

Despite this risk appetite recovery appears to continue into this session. Investors are still hoping more stimulus is on the horizon and also consider Spain requesting a full blown bailout as a real possibility, thus forcing the ECB to take action to relieve the eurozone debt crisis. As a result risk heavy sectors such as mining and energy stocks have pushed higher, with Evraz, Eurasian Natural Resources, Glencore and Xstrata all gaining between 2.2% and 4.3%.

Topping the loser board is Standard Chartered, which has shed over 21.5% bringing it down to 1150p in early trading after being accused by the US banking regulator for allegedly working with the Iranian government to hide transactions from the US authorities. Standard Chartered has denied any wrong doing and say that 99.9% of the transactions relating to Iran complied with the relevant regulations.

This news could not have come at a worse time for the banking sector as a whole, which has suffered various accusations over the past few months from Libor fixing to money laundering. Up until now Standard Chartered had done fairly well to keep out of any damaging allegations, however, now with the force of the New York State department of Financial Services investigating them they could lose their New York banking Licence. Other banks tracked the downwards movement, with HSBC off 1.2% and Barclays down 1%.

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