Britain's top shares rose sharply on Thursday after the Greek parliament passed a second austerity bill to secure emergency funds, with riskier assets such as oil stocks, banks and miners leading the charge higher. The FTSE 100 index closed up 89.76 points, or 1.5 percent, at 5,945.71, its fifth consecutive day of gains, managing to close out the quarter in slightly positive territory.
A surprisingly strong report on manufacturing in the US Midwest, which helped alleviate recent concerns about the global recovery, further enhanced investors' appetite for risk. Lloyds Banking Group led the banks higher, jumping 9.7 percent, as investors welcomed plans by its new Chief Executive Antonio Horta-Osorio to target a leaner group in a radical overhaul.
"There will be some material downgrades near term, but in the medium term (the review promises) a marked improvement," Atif Latif, director of trading at Guardian Stockbrokers, said. Lloyds' peer Royal Bank of Scotland advanced 4.6 percent. RBS was also boosted by newspaper reports that Mitsubishi UFJ Financial Group is in advanced talks to buy an Australia-based infrastructure advisory unit of RBS and its portfolio of public-private project-finance assets.
BG Group was the standout performer among integrated oils, ahead 4.7 percent, after the British gas producer doubled its best estimate of its oil and gas reserves in Brazil's Santos basin to six billion barrels. British oil services firm Petrofac, however, fell 2 percent, shedding some of the gains it made in the run up to its latest update. Despite this being in-line, an analyst said he was surprised by the announcement of the impending retirement of Petrofac's chief financial officer.
The Greek vote cleared the last obstacle to the next slice of aid from the European Union and the International Monetary Fund, but strategists and traders cautioned that the country is merely "kicking the can down the road". "We seem to be heading back towards the 6,000 barrier again but I'm still far from confident. Obviously it's another short-term successful solution to the crisis, but I've got no confidence that any measures actually voted in by the Greek parliament will actually be enacted by the Greek people," Martin Dobson, head of trading at Westhouse Securities, said.
Strategists also warned that the FTSE 100's rally could have been inspired by end-of-quarter window dressing by fund managers to make their portfolios look better, and the fact that the Federal Reserve's bond-buying programme has drawn to an end could make further gains from equity markets more difficult. "Don't get suckered into thinking that the sell-off is over. I think we're on rather dangerous grounds," David Morrison, market strategist at GFT Global, said.
The market has been awash with bid rumours of late, with shares in interdealer broker ICAP and free-to-air broadcaster ITV rising strongly on Wednesday on talk they could be targets. On the FTSE 250, the London Stock Exchange advanced 11 percent on speculation it could become a take-over target for Middle East investors Borse Dubai and the Qatar Investment Authority, after its aborted $3.5 billion bid for Canada's TMX Group. Nasdaq OMX Group could also be assessing an approach to LSE, according to a report in the Wall Street Journal.
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