FTSE CLOSE: Investors buoyed by signs of U.S. recovery

| October 16, 2012 | 0 Comments

By
This Is Money Reporter

02:27 EST, 16 October 2012


|

11:28 EST, 16 October 2012

17.15 (close): Hopes of an imminent bailout for Spain sent global stock markets higher today as investors cheered the prospect of a more stable eurozone.

The FTSE 100 Index raced more than one per cent or 64.9 points higher to 5870.5, while Wall Street’s Dow Jones Industrial Average added around 120 points in early trade, buoyed also by more strong third quarter US company earnings.

There were sharp gains across Europe amid the eurozone optimism, with the Cac 40 in France up 2.4 per cent and Germany’s Dax 1.6 per cent higher.

Market watch: Traders are scrutinising corporate results closely for clues to the health of the global economy

Spain is understood to be ready to
apply for a credit line which would pave the way for the European
Central Bank to start buying bonds, easing concerns over the struggling
country and the wider eurozone crisis.

The speculation strengthened the euro, which left the pound down against the single currency at 1.23 euros.

But sterling held firm at 1.61 US dollars.

Banking stocks were boosted by the
improved mood, with better-than-expected third quarter figures from US
group Goldman Sachs adding to the gains.

Goldman said it swung to a profit
after revenues more than doubled, which overshadowed the shock news that
Citigroup chief executive Vikram Pandit was resigning with immediate
effect.

In London, Royal Bank of Scotland rose 11.9p to 280p and Barclays added 9.25p to 246.1p.

Lloyds Banking Group rose six per
cent to near the top of the FTSE 100 Index amid reports the Financial
Services Authority has given the green light to plans to bolster its
finances by swapping assets with its Scottish Widows life insurance arm.

Lloyds, which rose 2.4p to 42.8p,
would borrow around £1billion of liquid assets held by Scottish Widows
under the deal by using a larger pool of lower quality securities as
collateral in a bid to boost its cash position.

Mining stocks were also encouraged by
the momentum in the eurozone, which comes ahead of a summit in Brussels
on Thursday, as Evraz rose 14.5p to 243.7p and Polymetal International
added 34p to 1160p.

Deteriorating trends in Europe’s car industry dented engineering firm GKN after it reported “some softening” in order books.

Redditch-based GKN saw its shares
fall three per cent or 7.1p to 204.8p as it warned challenging
conditions in Europe had offset stronger demand in the US and China and
in its civil aerospace division.

Outside the top flight, Sportingbet
pared earlier gains to stand 0.5p higher at 53.5p after the online gamer
said it would back an increased takeover offer from Britain’s biggest
bookmaker William Hill.

Sportingbet said it was minded to
recommend the 61.1p a share offer, which values the firm at more than
£400million, to its investors.

Meanwhile, housebuilder Bellway rose
three per cent in the second tier after it increased its final dividend
payment by 59 per cent to 14p per share following a 57 per cent rise in
pre-tax profits to £105million in the year to July 31. Shares were 30p
higher at 980p.

This boosted rival firms, with
Persimmon up five per cent or 39.5p to 786p, Redrow ahead 2.9p to
158.9p, Taylor Wimpey advancing 1.8p to 58.8p and Bovis Homes adding
6.5p to 510.5p.

The biggest Footsie risers were Evraz
up 14.5p to 243.7p, Lloyds Banking Group ahead 2.4p to 42.8p, Admiral
56p higher at 1175p and Royal Bank of Scotland up 11.9p to 280p.

The biggest Footsie fallers were GKN
down 7.1p to 204.8p, International Consolidated Airlines Group off 2.4p
to 155.6p, Capita down 6p to 733p and Intercontinental Hotels 11p lower
at 1593p.

15.10: The
Dow Jones has opened 101.8 points higher at  13,526.1 as investors take
heart from strong company earnings reports and hopes that Spain is
about to seek a bailout.

Traders
welcomed results from Coca-Cola and healthcare firm Johnson
Johnson. Figures from tech giant Intel are due after the U.S. closing
bell.

Back in London, the
FTSE 100 has surged along with other top European markets amid signs
Spain will overcome its scruples and request financial aid.

It’s up 59.3 points at 5,864.9 as the end of the session approaches. Read more here about Spain’s woes.

13.25:

London shares have gained ground as speculation mounts that Spain will soon request financial aid.

Spain is understood to be ready to apply for a credit line which would pave the way for the European Central Bank to start buying bonds, diluting the uncertainty around the struggling country and the wider eurozone crisis.

The FTSE 100 was up 59.4 points at 5,865 in lunchtime trading, and banks also got a boost from improved sentiment ahead of a eurozone summit in Brussels this Thursday.

Royal Bank of Scotland was up 5.7p at 273.7p, Barclays was ahead 2.5p at 239.5p, and Lloyds rose 1.8p to 42.7p.

Mining stocks were also encouraged by the momentum in the eurozone – Evraz rose 5.7p to 234.9p and Polymetal International added 26p to 1152p.

Ishaq Siddiqi of ETX Capital said: ‘Overnight, reports that Spain is considering a credit line demonstrated the country is finally making some progress on the financial support front, although we continue to assess the implications of such action.

‘EU policymakers have also expressed concern regarding Italy and what a credit line would mean for Italy – could we see pressure on borrowing costs or maybe even Italy requesting similar assistance.

‘What we do know is that any action will have to first be approved by EU leaders which we all know could take some time. We look for more details on the Spanish situation at this week’s EU summit which kicks off toward the end of the week.’

Deteriorating trends in Europe’s car industry dented engineering firm GKN after it reported ‘some softening’ in order books.

Redditch-based GKN saw its shares fall 3 per cent or 6.4p to 205.3p as it warned challenging conditions in Europe had offset stronger demand in the US and China and in its civil aerospace division.

10.55:

European markets are in the black as the U.S. corporate earnings season pans out better than expected and fears of a Greek debt default ease.

The FTSE 100 is ahead 26.2 points at 5,831.8, while on the continent Germany’s DAX is up 37.1 points at 7,298.4 and France’s CAC 40 is 11.3 points higher at 3,431.6.

David Madden, market analyst at IG, said: ‘The mood is positive in Europe today after Greek prime minister Antonis Samaras said he is confident that Greece will receive the next tranche of its bailout.

‘Greek borrowing costs have fallen as traders are less fearful of a default, and the trokia [European Commission, ECB and IMF] has recommended that Athens should be given a two-year extension to meet its budget-slashing targets.

‘The fear is that Greece will enter its sixth year of recession and the cycle will continue.’

He added: ‘Portugal witnessed protests yesterday after the government announced a new round of tax hikes and spending cuts that will probably keep the country in negative growth for a third year.

‘Rumours of a Spanish bailout are still doing the rounds. Madrid has made its opposition clear to receiving a bailout but it may be they are holding out for better terms, or that Spain will request a bailout after the regional elections in November.’

Stock futures point to a higher open on the Dow Jones, although pending inflation, manufacturing and industrial data could change the mood.

Fawad Razaqzada, market strategist at GFT Markets, said: ‘With Q3 earnings news continuing to broadly impress the market, traders will be keen to keep an eye on the detail and assuming we see further positive noises today – Coca Cola and IBM are two of the bigger names on the agenda – then perhaps there will be sufficient to push markets higher once again.’

Brent crude is trading at $114.16 a barrel and gold at $1,742.50 an ounce.

9.45:

Inflation fell to a near three-year low last month, although energy price hikes are soon expected to put household finances under pressure again.

The Office for National Statistics said CPI inflation dropped to 2.2 per cent in September, down from 2.5 per cent in August and the lowest level since November 2009.

The FTSE 100 has shed most of its early gains but remains 22.7 points ahead at 5,828.3 following a strong session on Wall Street. This was driven by positive U.S. retail sales figure and increased optimism over Spain’s future.

Spain is understood to be ready to apply for a credit line which would pave the way for the European Central Bank to start buying its government bonds, easing the uncertainty around the struggling country and the wider eurozone crisis.

Shares in Sportingbet surged 4 per cent on the London market today as the online gaming firm said it would back an increased takeover offer from Britain’s biggest bookmaker William Hill.

Sportingbet added 2.2p to 55.2p after it said it would recommend an expected 61.1p a share offer, which values the firm at more than £400million, to its investors. Read more here.

Lloyds Banking Group rose 2 per cent amid reports the Financial Services Authority has given the green light to its plan to bolster its finances by swapping assets with its Scottish Widows life insurance arm.

Lloyds, which rose 0.9p to 41.2p, would borrow around £1billion of liquid assets held by Scottish Widows under the deal, by using a larger pool of lower quality securities as collateral in a bid to boost its cash position.

Meanwhile, housebuilder Bellway leapt 6 per cent after it increased its final dividend payment by 59 per cent to 14p per share.

It posted a 57 per cent rise in pre-tax profits to £105million in the year to July 31. Its shares were 46.8p higher at 996.8p.

8.25:

The FTSE 100 has opened up 59.7 points at 5,836.4, tracking gains on Wall Street and in Asia following better than expected U.S. company results and economic data.

The mood has been buoyed by Citigroup’s forecast-beating earnings and by U.S. retail sales that sharply exceeded expectations. Read more here about CitiGroup’s results.

Investors are now awaiting earnings from corporate bellwethers such as Goldman Sachs, IBM and Intel, in the hope of further insights into the state of the global economy.

Greece is back in focus after leader Antonis Samaras said the debt-stricken country would conclude austerity talks with its lenders to continue receiving the bailout funds it needs. However, officials said the talks would most likely not be finished by Thursday’s EU summit.

The FTSE 100 closed 12.29 points higher at 5,805.61 yesterday, boosted by gains for heavyweight banks and hopes Spain is moving closer to asking for a bailout.

The latest consumer and wholesale price inflation numbers will be released later. A monthly increase of 0.4 per cent is forecast in CPI inflation for September, giving an annualised rate of 2.2 per cent, down from 2.5 percent in August.

PPI output prices for September are seen up 2.2 per cent year-on-year, unchanged from August’s rise, with PPI input prices seen falling 0.8 per cent year-on-year, after a 1.4 per cent gain in the previous month

Stocks to watch today include:

Rio Tinto: The world’s number two iron ore producer maintained its 2012 production guidance at 250million tonnes, saying its operations were performing strongly despite a volatile market caused by China’s uncertain economic outlook.

RBS: The bank will get the go-ahead this week from government and regulators to exit the state-backed insurance scheme covering its old ‘toxic assets’, in an early step towards reprivatisation, the Financial Times reported.

But plans to sell its American business have been derailed by a U.S. investigation into allegations it laundered money for rogue nations such as Iran, according to the Daily Mail.

BP: The oil major is the subject of persistent speculation, including market talk of a potential carve up of the company between french firm Total and UK peer Royal Dutch Shell, according to the Daily Mail market report.

GKN: The car and plane parts maker GKN said a sluggish European automotive market weighed on third quarter profit and that a continued slump could impact the group for the remainder of the year. It reported a largely flat pre-tax profit of £99million for the three months to the end of September.

Bumi: Financier Nat Rothschild has resigned from the board of the coal mining group he co-founded two years ago, attacking his partners and directors as they consider unravelling the Indonesian venture.

Carpetright: Britain’s biggest floor covering retailer, posted a small rise in underlying second quarter sales at its core UK business, as the rollout of store refurbishment and its laminate and bed ranges helped boost trading.   

N Brown Group: The British home-shopping group posted a 4.5 per cent decline in first-half underlying profit with the wet summer depressing demand for ladies clothing, though the firm said its sales were on an improving trend.

Bellway: The house builder reported a 57 per cent jump in profits for the year, beating analyst expectations and prompting it to lift its dividend.

Petropavlovsk: The miner said third-quarter gold production was up 39 per cent from the previous quarter and the company is on track to achieve full year production target of at least 700,000 ounces of gold.

Informa: The business media group said its full-year expectations remain unchanged.

Sportingbet: The bookmaker William Hill and partner GVC Holdings have agreed the terms of a £530million takeover of the online gaming company, valuing  Sportingbet shares at 61.1p each.

Smiths News: The group said its full-year underlying profit before tax rose to £47.5million, up from £38.6million a year earlier, with its medium term outlook remaining positive.

Spirit Pub Co: The pubs operator said its full-year profit before tax rose 16 per cent to £51million, and it is well placed to make further progress in the year ahead.

The comments below have not been moderated.

Jugglers are at it again, don’t forget US elections soon …..

jenny-yorks
,

yorks, United Kingdom,
16/10/2012 16:18

“The FTSE 100 was up 59.4 points at 5,865 in lunchtime trading, and banks also got a boost from improved sentiment ahead of a eurozone summit in Brussels this Thursday.”….no, that is just nonsense. There is always a difference in total purchases and total sales across the market and the share values which lead to slight rises and falls but it’s not much to do with anything in particular. Big problems cause big rises an falls but it would be better to use a five or ten day average to see trends.

Jetty
,

London, United Kingdom,
16/10/2012 14:55

This despite the report the other day that the US is on the edge of a fiscal cliff that will bring down the rest of the world and everyone is fearful that Spain will fail by having to ask for more help. Plus, the comment from that Lady in France saying the austerity measure may have actually been a bad move after all.

Jetty
,

London, United Kingdom,
16/10/2012 14:52

They could give this company a Golden wooden spoon….. just look at their Charts.

Irony
,

Shire of England,
16/10/2012 13:37

British business is recovering better than the doom and gloom merchants like our gutter press and the left wing BBC would have you believe,there are plenty of small and medium sized businesses that are doing very well considering the difficult circumstances.but never get any recognition.

alfonso55
,

Cornwall, United Kingdom,
16/10/2012 13:19

Reinvesting dividends has been just as poor a proformance as the shares themself over the last 10 years, within a month or so the share price is less than the reinvesting price, even buying on a Company Scheme has produced no gains just pain, today the share price is lower than the buy or reinvestment price, inflate then deflate, flatlined in my eyes. Hope you all have better luck with shares than we have over the years, even if you love shares as one does you may find out your life ends before they return a profit.

Irony
,

Shire of England,
16/10/2012 11:25

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