Britain's top share index ended up 1.8 percent on Thursday as bailout hopes for the US auto sector slightly lifted the deep gloom surrounding the global economy, boosting energy and mining stocks. In thin trading with the US closed for the Thanksgiving holiday, the FTSE 100 closed up 73.41 points at 4,226.10 after ending 0.4 percent lower in the previous session. The index is up 12.2 percent on the week.
Economic sentiment in Europe's currency zone fell to a 15-year low in November and inflation expectations plunged, reinforcing a view that there will be hefty rate cuts from the ECB and Bank of England next week. However, speculation that struggling US automakers would receive a government bailout eased the worst of the investor anxiety that has plagued markets since the credit crisis struck, and lifted equity indexes.
"Things that have gone down a lot recently are coming back, and some people may be repositioning ahead of an expected rate cut from the Bank of England next week," said Tineke Frikkee, manager of the Newton Higher Income fund said.
"However fundamentally things around are getting worse in the economy and companies are preparing for '09 to be a very tough year with lots of uncertainty." Oil shares added most points to the index, with BP gaining 3.4 percent, Royal Dutch Shell rising 3.3 percent and Tullow Oil advancing 10.2 percent.
Banks were also broadly higher with Standard Chartered surging 11.6 percent as a rights issue was well-received by the market, while Lloyds TSB added 2.5 percent and Barclays added 4.3 percent.
Trading on India's stock exchanges was stopped after a series of attacks by suspected Islamist gunmen in the commercial capital Mumbai killed at least 101 people. Old Mutual gained 4.6 percent after the insurer said it has scrapped the sale of its majority stake in South African general insurer Mutual & Federal, blaming "increasingly difficult economic conditions".
Tension among policymakers over Britain's economic woes surfaced as the Bank of England's David Blanchflower - known as the arch-dove of the nine-member voting panel - was quoted as saying that interest rates should have come down sooner than they did to prevent a prolonged downturn.
A Reuters poll of economists forecast that the BoE will cut rates by at least 50 points when it meets on Thursday after it slashed rates by an unprecedented 1.5 percentage points this month to shore up the economy.
Two UK retailers bore the brunt of a downturn in consumer spending, with high street icon Woolworths putting its business into administration, and furniture chain MFI announcing the closure of 26 of its 46 stores.
Kingfisher slid 2.4 percent after Europe's top home improvement retailer beat forecasts with an 8.3 percent rise in third-quarter profit but said trading conditions were tough. Other retailers saw their share prices climb, however, after the UK government cut value added tax by 2.5 percentage points in a bid to boost consumer spending.
Tesco gained 3.9 percent and Marks & Spencer gained 3.2 percent as retailers rolled out aggressive discount campaigns ahead of the Christmas shopping season. Mid-cap DSG International dropped 10.7 percent after Europe's second-largest electrical goods retailer swung to a first-half loss and suspended its dividend as it grapples with the deepening consumer downturn. Defensive pharmaceutical stocks lost ground as investors switched to sectors seen as higher risk. GlaxoSmithKline fell 1.2 percent, AstraZeneca slid 2.6 percent.
Comments
Comments are closed.