FTSE edges further into positive territory in 2009
Financials and miners were once again the dishes of the day, offsetting poor performances from M&S and Vodafone following results
The blue-chip index took on 35.8 points on Tuesday to close up 0.8% on the day and just over 1% higher in 2009 so far, while the FTSE 250 index added 121.7 points or 1.6% to 7,698.3.
The market’s comfortably-higher finish belied its mid-afternoon falter, when the lowest new US housing starts on record briefly undermined hopes for a much-needed economic recovery.
The US Commerce Department reported annual housing starts fell 12.8% to a seasonally-adjusted 458,000 in April, down from an upwardly-revised 525,000 in March. “Unless the figure for April is significantly revised upwards, it suggests that the housing market is still on its way down,” Arek Ohanissian, economist at the Centre for Economics and Business Research said today, “which is bad news for the economy as a whole.”
Still, with confidence remaining high that the UK economy has turned the corner, fuelling a shift in investor appetite towards taking on more risk, the resultant rally in financial and mining sectors was enough to keep the UK benchmark index’s head above water.
Banks received a fillip from reports the British Government has held talks with international investors to assess their interest in buying stakes in those banks that have been partially nationalised as a result of the financial crisis. Though any stake sales are likely to be a long way off, the mere talk of returning to a fully privatised banking sector was sufficient to send Barclays shares 5.0% higher to 294.75p, Royal Bank of Scotland up 4.4% to 43.1p, HSBC 3.5% firmer to 575p and Lloyds Banking Group 2.4% ahead to 100.3p. The latter today reported it is to cut an additional 625 banking jobs.
The positive knock-on effect of a gaining financial sector and its accompanying increase in risk appetite fuelled both insurance stock and real estate investment trusts (REITs): Aviva, Legal & General, Standard Life and Prudential took on 4.8%-7.3%; Land Securities, British Land, Liberty International and Hammerson added 4.0%-6.2%.
Interdealer broker ICAP also attracted buyers, gaining 5.6% to 422p, after topping market expectations for its full-year results.
On the downside, Marks & Spencer Group led the casualties lower, shedding 8.1% to 311.75p after cutting its final dividend by a third. Though the move was widely expected, dividend cuts are never popular and the announcement provided investors with an opportunity to take advantage of the retailer’s relative share price strength of late.
The negative readacross dragged Next, Morrison Supermarkets and Tesco back 1.1%-2.1% each.
Vodafone was another poor performer following its own results statement. The index heavyweight lost 4.0% to close at 122.4p after revealing its net profit more than halved in the fiscal year 2009, hurt by a £5.9 billion impairment charge.
FinnCap analysts on Tuesday recommended investors switch out of Vodafone “where the market pressures remain high” into BT “where the pain has been taken and we suggest there are few structural surprises to change the economics of the customers and their spending.” BT was 2.0% ahead at 88.6p by close of play.
Oil & gas producers fell out of favour as the price of oil retreated from a recent six-month high, pushing Cairn Energy down 2.4% to 2,395p, BG Group 1.5% lower to 1,090p and BP 0.8% behind at 509.25p. Royal Dutch Shell bucked the trend, however, edging 0.1% higher to 1,637p as shareholders cheered a 60% vote against director pay packages at the Anglo-Dutch firm’s annual general meeting today.
