Britain's top share index closed 0.8 percent firmer on Tuesday, pushed up by financials and miners, though gains were limited by figures that showed new US housing starts fell to record lows. The FTSE 100 closed 0.8 percent or 35.80 points higher at 4,482.25 in a choppy session having being up as much as 4,512.70 points and down as low as 4,445.48 points earlier.
Financial stocks pushed higher with news that Britain has held talks with investors to gauge their interest in part-nationalised lenders helping the sector, while miners were among the highest risers as copper gained 1 percent. Rio Tinto, Kazakhmys, Eurasian Natural Resources, Anglo American, Lonmin and BHP Billiton were up between 1.6 and 7.5 percent.
"The market has been flirting with its 200 day average which is now proving to be a bit of a barrier. It has not really been able to get beyond the 4,500 level," said Mike Lenhoff, strategist at Brewin Dolphin. "Each time it has hit the 4,500 level it has gone back but it has not come back very far. However, there is a very strong conviction now that recovery lies ahead and that earnings are going to come through and it is not going to budge until there is some real disappointing news flow," said Lenhoff.
The FTSE's gains were limited by new US housing starts and permits unexpectedly falling to record lows in April, denting hopes that stability in the housing market was imminent. The Commerce Department said housing starts fell 12.8 percent to a seasonally adjusted annual rate of 458,000 units, the lowest on records dating back to January 1959, from March's upwardly revised 525,000 units.
Vodafone lost 4 percent after forecasting flat profits at best for 2010 and announcing a 5.9 billion pound ($9.05 billion) impairment charge and said it is to speed up cost-cutting plans. A person briefed on the matter said that Britain had held talks with investors to gauge their interest in buying its stakes in part-nationalised lenders, but was in no rush to exit.
"There's a sense that the worst is over for the financial sector and (the potential sale of stakes in UK banks to overseas investors) is adding fuel to the fire," said Peter Dixon, economist at Commerzbank. HSBC, Standard Chartered, Royal Bank of Scotland, Barclays and Lloyds Banking Group added 0.7-5 percent. Real Estate Investment Trusts were also higher from positive sentiment in the financial sector. British Land, Hammerson, Land Securities Group and Liberty International were up 4 to 5.6 percent.
Life insurers were given a boost by the increase in risk appetite. Aviva, Legal & General, Prudential, Standard Life added 4.8 to 7.3 percent. ICAP added 5.6 percent after the world's largest interdealer broker beat forecasts with a 5 percent rise in annual pretax profit. On the downside, energy stocks were lower as crude fell from a six-month high to trade around $58 a barrel from above $60. BG Group, BP and Cairn Energy were down 0.8 to 2.4 percent.
Marks & Spencer, which has rallied more than 50 percent over the past two months, tumbled 8 percent after it posted an expected 40 percent slide in full-year profit and cut its final dividend to preserve cash. Peer Next slipped 2.1 percent while other retailers also suffered, with Tesco, Morrison and Home Retail off between 0.9 and 1.4 percent.
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