Britain's top share index rose for a third day in a row on Thursday as gains in banks and miners offset weakness in Royal Dutch Shell, Stagecoach and British American Tobacco after their results. The FTSE 100 closed 49.11 points or 1.2 percent higher at 4,291.65 in a choppy session, swinging from a low of 4,200.24 to a high of 4,352.47.
The UK benchmark rallied 8 percent on Wednesday, but it is still down 12.5 percent for the month and 33 percent for the year. More than 1.3 billion shares changed hands, compared with 1.67 billion on Wednesday and last week's average of 1.49 billion. "Things were very, very oversold last week.
This week a lot of the doom and gloom has almost been factored in and people have suddenly thought that at these levels if I am taking a five-year view, it can't go that wrong," said Angus Campbell, head of sales at Capital Spreads. "Whether it will be maintained is another question. It doesn't mean that sentiment has completely changed."
Banks benefited from the US Federal Reserve's move to cut interest rates by half a percentage point to 1.0 percent on Wednesday to cushion the impact of a global recession. The US economy shrank at a 0.3 percent annual rate in the third quarter, its sharpest contraction in seven years as consumer cut spending and businesses reduced investment in the face of rising fears that recession was setting in.
Barclays, Royal Bank of Scotland, HSBC, HBOS, Lloyds TSB and Standard Chartered put on between 4 and 10 percent. The sector was also supported after Deutsche Bank posted results that were not as poor as the market had expected. Deutsche Bank shares gained nearly 18 percent. China, Norway, Taiwan and Hong Kong also cut interest rates, paving the way for the Bank of England and the European Central Bank to ease policy at their regular meetings next week.
Miners held on to their earlier gains, despite metal prices turning negative in afternoon trade. Vedanta Resources soared 15.8 percent, Xstrata advanced 8.2 percent, BHP Billiton added 5 percent, Rio Tinto put on 3.3 percent and Antofagasta climbed 8.8 percent. Kazakhmys surged 12.2 percent after the copper miner said it would reduce copper output next year due to lower expected expenditure and said production was in line with 2007.
SHELL, BAT, STAGECOACH WEIGH Heavyweight Royal Dutch Shell sank 4.1 percent after it said oil production declined in the third quarter even though its earnings, helped by high oil prices, beat market forecasts. Rival BP shed 2.2 percent. Oil services companies, however, rose sharply on hopes that oil prices may have stabilised after recent falls. Petrofac leapt 13.4 percent, Wood Group soared 11.8 percent and oil exploration company Cairn Energy jumped 15.2 percent.
"The sector has been bombed out recently. It has had its day in the sun," a trader said. Shares in British engine maker Rolls-Royce rose 9.1 percent after the firm reported that trading was in line with market expectations, prompting numis to repeat its "add" stance and 330 pence target price for the stock. AstraZeneca gained 5.2 percent. The drugmaker raised its full-year earnings forecasts as third-quarter forecasts beat expectations.
British American Tobacco, however, shed 7.1 percent as investors cashed in recent gains after the cigarette maker reported a 17 percent rise in nine-month earnings. Peer Imperial Tobacco was down 4.7 percent. Scottish bus and rail firm Stagecoach sagged 8 percent as Panmure Gordon cut its target price on the stock and reduced its future earnings estimates after the company said its trading since August 28 had been in line with expectations. Rival FirstGroup lost 6 percent.
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