FTSE bounces back as miners and financials rally
As several central banks unveiled their latest musings, financials and resource stocks buoyed indices on Wednesday
After a timid start, the UK market gathered pace in afternoon deals as Wall Street kicked off on positive terrain. The FTSE 100 index closed up 1.2% or 50.0 points at 4,280.0, while the FTSE 250 index added 1.8% or 127.9 points to 7,320.9.
European indices were also in fine fettle, after the European Central Bank injected EUR 442 billion into local money markets, stimulating optimism about the region’s economic recovery prospects.
The latest figures from the ECB on the current account balance also offered encouragement. The eurozone deficit shrunk to EUR 5.9 billion in April from the previous month’s revised EUR 7.0 billion gap, while economists had expected the deficit to widen.
The ECB wasn’t the only central bank having a busy day today. The Bank of England met with the UK Treasury Committee, and the Federal Reserve’s latest open market committee meeting is scheduled to get under way imminently. Fear circulated in the markets earlier today that the Fed may extend its economic stimulus but these appeared to have been alleviated by close of play in the UK.
Among equities, banks helped lead indices higher both on home soil and on the continent as investors moved away from defensives and back into those sectors perceived to be higher risk. Barclays gained 4.5%, bolstered by news Dubai-based investment vehicle Al Habtoor Group is getting ready to up its stake in the British bank to around 2.5% from 1.4% currently.
Standard Chartered, Lloyds Banking Group, HSBC and Royal Bank of Scotland each added between 1.1% and 5.3%.
But it was the mining sector that was mostly to thank for the benchmark index’s solid performance as Anglo American, Lonmin, Kazakhmys, Eurasian Natural Resources, Rio Tinto and Xstrata filled the top six leaderboard positions, taking on 5.5%-10.2%. Pole position was populated by Anglo American which, after swiftly rejecting Rio’s preliminary merger approach earlier in the week is now under pressure from shareholders to remain open to talks.
Metal extractors were also buoyed by higher resource prices on the back of a weaker greenback. The story was the reverse, however, for oil prices, which had edged 67 cents lower to $68.6 per barrel at the UK close after weekly inventories revealed a rise in oil stocks.
On the downside, a number of defensives featured, with utility providers, pharmaceuticals giants and supermarkets groups all racking up losses.
With little in the way of earnings news among the ‘blue-chips,’ focus switched to the mid-caps where Kesa Electricals, Stagecoach and Inchcape all unveiled numbers this morning.
Car dealer Inchcape led the FTSE 250 risers with a 15.4% jump after revealing it has slashed its net debt as it announced sales in line with expectations. Numis responded by upgrading its recommendation to Add on valuation grounds.
Bus and rail operator Stagecoach also stood out, 8.5% higher, after its preliminary finals beat analyst expectations and it pleased shareholders with a dividend hike to 6p for the full year.
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