Flat finish belies rallying financials

Weaker oils and defensives offset strong performances from financials and miners on Tuesday

Holly Cook | 14-04-09 | E-mail Article

London’s leading index managed only marginal gains on the first day back to business after the four-day Easter break as weak performances from oil heavyweights and defensives largely outweighed rallying financials and miners.

The FTSE 100 index closed just 5.28 points of 0.1% higher at 3,989.0, while the FTSE 250 index, seen as a closer representative of the domestic UK economy, gained a solid 2.5%, up 173.3 points at 7,152.2.

At the time of the UK close, US indices were struggling to make headway, under pressure following a surprise fall in the nation’s retail sales, which dropped 1.1% in March—the first decline so far this year. Fears recent economic optimism could have been over-cooked sent Wall Street sliding downwards.

Back in the UK, meanwhile, the pound found its footing and rallied to a five-week high against the euro of EUR 1.12, helping bring a little spring cheer to the British trading floors.

Among equities, UK banks were the main fuel behind the FTSE 100’s rise on Tuesday after Goldman Sachs surprised the market by announcing its first quarter earnings a day early. The bank further surprised by unveiling figures that were markedly better than had been expected and said it plans to raise $5 billion via a common share sale, which will be used to pay back government funds.

British peer Barclays jumped 10.1% to close at 195.5p, buoyed by the ensuing positive sentiment surrounding banks and receiving an extra fillip from weekend press reports the UK group is willing to consider offers for its asset management arm, Barclays Global Investors. Barclays last week confirmed the sale of its ETF business, iShares. Other banking sector plays, including Lloyds Banking Group and Standard Chartered were also in demand today, each adding a respective 10.6% to 87.9p and 4.0% to 1,025p.

Also on the up were a number of metals extractors, tracking rising metals prices that helped send miner Vedanta Resources into the top blue-chip spot, 15.4% ahead at 1,008p, while Kazakhmys took on 10.2% to 513.5p and Xstrata gained 7.2% to 613.5p. Rio Tinto, which will tomorrow announce its first quarter production report, ended the session 5.9% firmer at 2,500p.

Conversely, fellow commodity plays the oil producers were held under on the back of recent oil price weakness. BP lost 1.7% to 438.5p, Tullow Oil eased 1.5% to 765.5p and Royal Dutch Shell slipped 1.1% lower to 1,398p.

Additional weight was applied to the leading index by the defensive sectors: tobacco producers British American Tobacco and Imperial Tobacco fell back 4.8% to 1,495p and 3.2% to 1,430p, respectively; utility firms Pennon and United Utilities were behind by 2.4% at 420.75p and 2.2% at 488.25p; and supermarkets groups Morrison and Tesco each lost 2.7% to 243.25p and 2.4% to 323.5p.

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Holly Cook is Site Editor of Morningstar.co.uk and Hemscott.com. She would like to hear from you but cannot give financial advice. You can contact the author via this feedback form.
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