FTSE CLOSE: RBS shares enjoy a boost; surprise drop in UK jobless rate welcomed

| October 17, 2012 | 0 Comments

By
This Is Money Reporters

02:36 EST, 17 October 2012


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11:22 EST, 17 October 2012

17.10 (close): Royal Bank of Scotland enjoyed a shares boost today as its exit from the Government’s toxic asset insurance scheme fuelled hopes of a return to the private sector.

RBS gained two per cent on news of its withdrawal from the state-backed Asset Protection Scheme (APS) in another buoyant day for the FTSE 100 Index, which closed 40.4 points higher at 5910.9 after yesterday’s one per cent gain.

Trading was more subdued on Wall Street’s Dow Jones Industrial Average, which was down 10 points as the Footsie closed following lower-than-expected third quarter figures from technology giants IBM and Intel.

Earnings watch: U.S. company results have beaten expectations, prompting hopes the world's biggest economy is doing better than previously believed

Spirits were lifted in Europe after
Moody’s decided against downgrading Spain to junk status. Analysts
expect the country will soon make a request for help to Europe’s bailout
fund, which is a necessary condition for the European Central Bank to
start buying its bonds in the markets.

Job figures in the UK also exceeded
expectations, with jobless claims falling by 4,000 and unemployment
dropping to 7.9 per cent. Employment grew in the quarter to August to
29.6million, the highest since records began in 1971, although part-time
employment made up a larger portion of the figure.

And the pound was given another reason
to strengthen against the euro and dollar after minutes of the Bank of
England’s most recent policy meeting offered signs that more
quantitative easing in November was far from guaranteed.

Sterling rose to nearly 1.62 US dollars and 1.23 euros.

RBS, which is 80 per cent owned by the
taxpayer, was firmly in the spotlight after it said it would exit the
APS tomorrow, saving it £1.4million a day and paving its way to becoming
a private company.

Shares in the bank rose 6.1p to 286.1p.

Among other blue-chip risers, Tesco
surged nearly three per cent after broker UBS upgraded its price target
on the supermarket, which it said was on the path to stability in the
UK. Shares lifted 8.4p to 316.3p.

Miners benefited from the improved
market confidence, with Eurasian Natural Resources up by 7 per cent –
23.8p to 352.2p – and Kazakhmys 51p stronger at 760p.

In a quiet session for corporate news,
shares in Guinness and Smirnoff drinks firm Diageo fell nearly one per
cent after a second quarter trading update fuelled worries about its
performance in Asia Pacific. Shares were down 14p to 1768.5p.

Elsewhere, tool and equipment provider
Speedy Hire was lower despite it saying that recent trading had been in
line with expectations. Underlying revenues were five per cent higher,
helped by its focus on regulated industries in the UK. Shares were off
0.8p at 30.25p.

FTSE 250 firm Cable Wireless
Communications added four per cent, up 1.3p to 37.5p, after it said it
was in talks to sell all of its 51 per cent stake in a Macau telecom
operator.

The biggest Footsie risers were
Eurasian Natural Resources up 23.8p to 352.2p, Kazakhmys ahead 51p at
760p, Anglo American 96.5p higher at 1905.5p and Vedanta Resources up
48p to 1147p.

The biggest Footsie fallers were BAE
Systems down 7.8p to 321.3p, Pearson off 26p to 1217p, Bunzl 18p lower
at 1099p and Compass down 10.5p to 684p.

16.25: The FTSE 100 has added to gains and is up 39.7 points at 5,910.2 in late trading.

The
Dow Jones is still sluggish, down 13.1 points at 13,538.7, with concern
about weak tech industry results outweighing robust housing data.

14.55:  The
Dow Jones has slid 32.4 points to 13,519.4 on the open as U.S.
investors get their first chance to react to disappointing results from
IMB and Intel.

The latest
figures from Bank of America have also proved mixed, although strong
U.S. home building data from September has cheered traders.

The FTSE 100 is showing resilience – it’s still up 25 points at 5,895.5.

13.10: Spirits were lifted in Europe today after Moody’s decided against downgrading Spain to junk status.

Analysts expect the country will soon make a request for help to Europe’s bailout fund, which is a necessary condition for the European Central Bank to start buying its bonds in the markets.

Developments at an EU summit in Brussels starting tomorrow will be closely watched, with Greece’s latest handout under scrutiny as well as Spain’s debt crisis.

Miners have benefited from improved market confidence, with Eurasian Natural Resources up by 6 per cent or 20p to 348.5p and Kazakhmys 34.25p stronger at 743.25p.

Shares in Guinness and Smirnoff drinks firm Diageo fell nearly 2 per cent after a second quarter trading update fuelled worries about its performance in Asia Pacific. Shares were down 29.75p to 1752.75p.

The Footsie is up 28.4 points to 5,898.9 in lunchtime trading.

11.50:

Unexpectedly good jobs figures have helped to boost stocks today.

The FTSE 100 was up 21.1 points at 5,891.6 in late morning trading.

‘It appears that it is not just the U,S. that can have surprise employment data. News of a drop in the UK unemployment rate below 8 per cent will be greeted with cheers in Downing Street, as the rate falls to 7.9 per cent for September,’ said Chris Beauchamp, market analyst at IG.

‘Youth unemployment is down below one million for the first time in a year as well, adding to the good news.’

Stock futures point to a flat to lower open on the Dow Jones as U.S. investors digest weak corporate news from the tech industry.

U.S. housing market data and fresh results from Bank of America, Pepsi and Halliburton among others are on Wall Street’s agenda today.

Fawad Razaqzada, market strategist at GFT Markets, said: ‘Yesterday’s bumper gains on Wall Street look set to ebb a little at the open and sentiment certainly isn’t being helped by those numbers from IBM and Intel that came in after the closing bell.

‘After a generally upbeat start to the earnings season, these two tech giants are arguably showing up the fallibility of the global economy and it’s once again going to call into question just how good subsequent third quarter numbers can be.

‘But with BNY Mellon, Bank of America, American Express and eBay amongst today’s highlights there’s certainly the potential to see another wholesale shift in sentiment in the near term.’

10.20:

The FTSE 100 is up 6.9 points at 5,877.5 in a quiet session for domestic corporate news.

Royal Bank of Scotland shares got a boost after its exit from a state-backed toxic-asset insurance scheme fuelled hopes it was getting closer to a return to the private sector.

The bank, which is 80 per cent public owned, will save £1.4million a day when it exits the Asset Protection Scheme tomorrow, having paid £2.5billion since signing up February 2009.

Shares rose 2 per cent, up 5.6p to 285.6p. Read more here.

Tesco was up 6.6p to 314.5p after broker UBS upgraded its price target on the supermarket, which it said was on the path to stability in the UK.

Shares in tool and equipment provider Speedy Hire were 2 per cent lower despite its assurance that recent trading was in line with expectations.

Underlying revenues were 5 per cent higher, helped by its focus on regulated industries in the UK. Shares were off 0.75p at 30.25p.

Cable Wireless Communications added 3 per cent, up 1.3p to 37.5p, after it said it was in talks to sell all of its 51 per cent stake in a Macau telecom operator.

Unemployment fell by 50,000 in the quarter to August to 2.53million, the lowest since the spring, giving a jobless rate of 7.9 per cent.

Bank of England minutes from its October  meeting showed members were united over keeping rates and quantitative easing on hold, but there were signs of a split over further stimulus.

8.30: The FTSE 100 opened up 12 points at 5,882.6 as strong earnings from U.S. companies brighten the economic picture.

Wall Street rallied last night, with results from healthcare firm Johnson Johnson and investment bank Goldman Sachs raising hopes for the rest of the U.S. reporting season.

However, the news was less rosy in the tech sector as updates from Intel and IBM both undershot hopes.

Investors are keeping a close eye on
third-quarter corporate results for hints about short-term market
direction. The season is gathering pace in the U.S. – Bank of America,
American Express and PepsiCo report today – and will pick up in Europe
next week.

Moody’s has
confirmed Spain’s investment-grade credit rating, bucking widespread
expectations that the eurozone country would be cut to a junk rating.

Speculation
is rife that Spain is preparing to make a formal request for financial
aid. That would allow the European Central Bank to start buying its
government bonds and help bring down Spain’s sky-high borrowing costs.

The
Footsie closed up 64.93 points at 5,870.54 yesterday, putting it on the
cusp of breaking out of its recent trading range, as investors welcomed
a media report saying Germany could adopt a softer approach towards
financial aid to Spain.

Ex-dividend factors will knock 1.11 points off the index today, with BAE Systems and Capital Shopping Centres both trading without their payout attractions.

Unemployment data and Bank of England minutes of its October rate-setting meeting are due out later.

Stocks to watch today include:

BHP Billiton: The miner has outlined plans to boost output by 5 per cent by the end of June 2013, relying on higher tonnages to reduce costs and cushion the impact of lower selling prices. BHP said quarterly iron ore production was steady at 39.8million tonnes.

BP: The oil giant has set a deadline of Thursday for all bids for its stake in TNK-BP, in a move expected to elicit offers both from its oligarch partners, AAR, and from Kremlin-controlled Rosneft, the Daily Telegraph said.

International Personal Finance: Third-quarter profit is in line with last year.

Speedy Hire: The company is confident of meeting its full-year expectations.

Cable Wireless Communications: The firm is in advanced talks to sell its controlling stake in Macau’s largest telecoms group to Citic Telecom International, the Financial Times said.

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