US rally helps minimise UK losses
The FTSE 100 index closed lower on Tuesday but not as low as it could have as defensives helped offset insurance sector falls
The FTSE 100 index dropped 0.9% during the session to close at 3,816.44, off 34.29 points, and the FTSE 250 index lost 0.2% or 13.59 points to 5,905.75.
Wall Street rallied, meanwhile, as bargain-hunters returned to the market following the previous session’s heavy losses. Caution wasn’t completely thrown to the wind, however, as investors digested comments from Federal Reserve chairman Ben Bernanke and awaited President Obama’s speech to congress.
Bernanke warned that it is likely to take more than two or three years before the US experiences a full but he also said that if actions taken by the Government and the Fed are successful in restoring a certain amount of financial stability, the current recession could end this year.
Back in London, it was the blue-chip insurers and banks that once again dragged the leading index under. The financial sector remained under pressure amid ongoing fears over the state of the global financial system, fuelled by the unraveling of details from the US government’s rescue plan, concern it may have to take a major stake in Citigroup, fears AIG is in need of further funds, and expectations of substantial losses from Royal Bank of Scotland and Lloyds Banking Group later this week.
Insurers Friends Provident and Prudential lead the losers, down 9.8% at 67.8p and 7.6% at 266.75p, respectively, while Lloyds lost 5.1% to 53.9p. But RBS outperformed, gaining 4.3% to 22.1p, ahead of its confirmation of full-year results this Thursday. Shares in the bank were also in demand on reports the group is in talks to sell its Taiwan operations for US$500 million.
Heavyweight Vodafone applied some additional pressure after announcing it is cutting 500 jobs or 5% of its workforce despite recently upgrading earnings guidance. Shares in the mobile phone group closed 2.8% weaker at 122.65p.
Miners also weighed as gold slipped further away from last week’s US$1,000 per ounce highs, sending Eurasian Natural Resources 4.9% lower to 318p and Randgold Resources down 4.6% to 3,188p.
On the upside, defensives were in play, with AstraZeneca and Shire rising 0.9% to 2,415p and 1.4% to 907p each, while AB Foods added 2.4% to 658.5p. Buyers also came for a select few retailers after UK retail sales figures turned out to not be as bad as feared this morning. Marks & Spencer ticked up 0.7% at 251p and Kingfisher gained 0.8% at 125.3p.
But it was Thomson Reuters that filled the top post, jumping 6.6% to 1,409p after the news and financial data provider beat market expectations for the fourth quarter and forecast an increase in revenues in 2009.
