Tuesday, October 16 09:47:58
Britain's top shares were higher today, tracking gains on Wall Street as investors looked more positively on the outlook for equities following recent better-than-expected U.S. corporate results and macro data. Gains by heavyweight energy, mining, and banking stocks provided the main strength for the blue chips as investors' appetite for riskier assets continued to improve on hopes that the outlook might be brightening. Lloyds Banking Group was the top FTSE 100 gainer, up 2.5 percent with traders saying the bank was helped by reports late on Monday that Britain's financial regulator has given the green light it to go ahead with a plan to bolster its finances by swapping assets with its insurance arm.
Under the deal, Lloyds, in which the UK government has a 40 percent stake, will borrow over 1 billion pounds of liquid assets held by Scottish Widows using a larger pool of lower quality securities as collateral, boosting its cash position amid a continued scarcity of bank funding. "This move would give a boost to the hard-pressed lender freeing up cash and hopefully leading it a step closer to paying down the government's stake," one trader said. Among the miners, Rio Tinto added 0.8 percent as the world's no. 2 iron ore producer maintained its 2012 production guidance at 250 million tonnes, saying its operations were performing strongly despite a volatile market caused by China's uncertain economic outlook.
By 0829 GMT, the FTSE 100 index was up 21.10 points, or 0.4 percent at 5,826.71, having ended 0.2 percent higher on Monday, rallying after falls the previous week. "The big question is how long it's going to last. We are at the constant mercy of headlines from Europe, and I suppose we are going to see some hesitancy heading into the EU summit (at the end of the week," said Ishaq Siddiqi, market strategist at ETX Capital.
EU leaders meet in Brussels on Thursday and Friday with the all-pervading eurozone debt crisis squarely on the agenda still although recent European Central Bank moves to detail rescue funds and bond buy-back plans have alleviated the situation.
Although there seemed to be more optimism on the outlook for third-quarter earnings and global growth, the fragility of the recovery continued to be illustrated as well. GKN was the biggest blue chip faller, shedding 3.7 percent in strong volume of 110 percent of its 90-day daily average in the first hour and a half of trading, compared with 15 percent overall for the FTSE 100 index. The car and plane parts maker said a sluggish European automotive market weighed on third quarter profit and that a continued slump could impact the group for the remainder of the year. A broker downgrade weighed on British Airways-owner International Consolidated Airlines Group, which lost 2.1 percent as Liberum Capital cut its rating to "sell".
Financial services firm Hargreaves Lansdown was also under pressure, off 0.2 percent as Credit Suisse downgraded its rating to "underperform" following recent positively receieved results. Credit Suisse said it sees the stock as "up with events and ignoring regulatory uncertainty." Charles Stanley technical analyst Bill McNamara was also cautious on Hargreaves Lansdown saying it is looking overbought.
"The fact that the 14-day RSI (relative strength indicator) has surged to a reading of 82 percent is not a sell signal per se, but It does strongly suggest that the scope for further upside in the near term is likely to be limited," McNamara said. "On the other hand, a reversion to the short-term uptrend could take the share price back to 650 pence in a hurry." ( C) Reuters