Britain's leading shares added 0.4 percent on Wednesday as financial issues drew strength from a possible solution to eurozone debt worries, offsetting a retreat by heavyweight commodity shares. The FTSE 100 ended 20.15 points higher at 5,131.99, recovering from a session low of 5,105.30 in the afternoon but still well below the morning peak of 5,181.21.
"Those who live by the sword die by the sword, and a weak start for Wall Street saw the FTSE's gains decimated with astonishing speed as the US market opened heavily down," said David Jones, chief market strategist at IG Index. US blue chips had recovered by London's close, but still were down 0.3 percent after Federal Reserve chairman Ben Bernanke said he could begin pulling back stimulus from the economy by first removing cash from the financial system.
Analysts described his remarks as "hawkish," suggesting the US economy is on a stable path to recovery and the dollar was lifted by such hopes. Antofagasta, Xstrata, Anglo American, and Kazakhmys shed 1.2 to 2.1 percent. BHP Billiton fell 1.5 percent after it posted its weakest first-half profit in four years and signalled caution over a sustained global recovery. Rio Tinto, which reports results on Thursday, fell 1.3 percent. China has indicted four Rio employees on charges of bribery and violating commercial secrets.
The energy sector slipped back with the crude price also hurt by the firmer dollar. BP managed to add 1.0 percent but Royal Dutch Shell dropped 1.6 percent as the stock traded ex-dividend.
Drugs heavyweight GlaxoSmithKline and household goods firm Unilever also both traded ex-dividend. Including Shell, the three stocks took 10.99 points off the blue chip index. Autonomy was the top blue chip faller, losing 5.5 percent after the software firm announced a 500 million pound ($779 million) convertible bond to be used for acquisitions and said it was buying one of its resellers, Micro Link.
Financial issues provided the main support for blue chips as hopes gathered momentum that a solution could soon be found to eurozone debt issues. European Union leaders will hold a special summit on the economy on Thursday with some announcement expected to be made, although sentiment was mixed on whether a deal over Greek debt could be done. Banks, under pressure over their exposure to euro zone debt problems, moved higher.
Lloyds Banking Group, Barclays, Royal Bank of Scotland, HSBC , and Standard Chartered were up 1.2 to 3.7 percent. RBS said it believes Lloyds and Barclays, in the UK, stand out "as the biggest beneficiaries of a market rebound based on recent share price declines and implied cost of equity in current valuations."
Life insurers also found good support, with Aviva up 5.0 percent, bouncing back from recent weakness and helped by some trader talk that it may be a target of Resolution in tandem with Prudential. Resolution shed 1.3 percent, ahead of full-year new business numbers due on Thursday, but Prudential added 3.8 percent. Legal & General gained 2.9 percent. Financial issues also got a boost from the latest Bank of England inflation report, which raised expectations that interest rates will need to stay low for longer than many analysts currently predict. The central bank also refused to rule out further quantitative easing measures after the report showed the British economy recovering only very slowly.
Comments
Comments are closed.