FTSE extends rally as financials get snapped up

The volume of swine flu headlines diminished on Thursday, giving space to stories of rallying financials and strengthening commodities

Holly Cook | 30-04-09 | E-mail Article

Financials and miners once again took the high road on Thursday as optimism surrounding the future of the banking industry continued to gather pace and resources prices edged ahead as global demand concerns faded.

The FTSE 100 index took on 54.1 points or 1.3% to end the session at 4,243.7. The blue-chip index is down 4.3% so far this year but it has racked up gains of over 20% since the low hit in early March. The FTSE 250 index outperformed the UK benchmark, adding 2.2% or 158.2 points to 7.516.1.

The FTSE 100 had edged dangerously close to the 4,300 mark in late morning trade but mixed earnings news and economic reports from the US tempered UK gains somewhat in afternoon deals.

By the UK close, Wall Street was advancing around 1%-2% as investors shrugged off weak sales news from the household goods industry and bankruptcy confirmation from Chrysler to instead focus on pleasing figures from Starbucks and Kellogg and a surprise retreat in the number of unemployed claiming first-time jobless benefits.

Among UK-listed equities, British banks continued their rebound, led by Royal Bank of Scotland for the second session running. Shares in the group yesterday benefited from multiple analysts’ price target increases, and received an extra fillip today on the back of upbeat comments from the UK-based executive of Fidelity International, Anthony Bolton, who said the beaten-down sector could lead the market out of its slump.

UK banking stocks have been experiencing higher trading volumes across the board of late, but RBS’ announcement this morning that it is selling its 50% stake in Spanish car insurance group Linea Directa Aseguradora, booking a net gain of £200 million, attracted additional buyers to the stock.

RBS closed up 13.6% at 41.8p, Barclays, which was today upgraded by RBS analysts to Buy from Sell, added 9.8% to 281.5p, Lloyds Banking Group climbed 8.2% higher to 112p and Standard Chartered was 5.9% firmer at 1,058p.

Again, insurers were in demand, with Legal & General 13.0% higher at 58.3p, Friends Provident up 7.4% at 64.2p and Aviva ahead by 7.0% at 315.5p. Standard Life failed to join in the upward trend, however, sliding 1.3% to 190.3p after reporting a drop of 20% in worldwide life and pensions sales in the first quarter and a 27% decline in UK figures.

Elsewhere, as concerns over global demand for resources continued to subside, metals prices enjoyed an extended rally on Thursday that saw Vedanta Resources, Antofagasta, Kazakhmys, Xstrata, Rio Tinto, BHP Billiton and Anglo American all add between 3% and 9% to their market values.

Among the blue-chip fallers, defensives were out of favour set against the improvement in market sentiment. As such, investors took pharmaceuticals giant AstraZeneca's better-than-expected results as an opportunity to take profits, sending the shares down 2.4% to 2,385p; water provider Severn Trent lost 2.2% to 1,048p; and food producer Unilever eased 1.6% to 1,326p.

Home Retail Group continued to dominate the bottom spot, falling a further 4.6% to 251.75p on Thursday after yesterday reporting full year numbers that freaked the market.

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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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