FTSE breaks through 5,900 mark on Greek bailout deal
BRITAIN’S leading shares index closed higher yesterday, led by commodity and financial stocks, after Greece moved a step closer to securing an international bailout and avoiding a messy default.
At the close, the FTSE 100 index was up 53.31 points, or 0.9 per cent, at 5,905.70, in volume just 70 per cent of the 90-day average, with many traders in London away for the school half-term holiday.
“Buyers lifted the FTSE on the back of the Greek news, but it was not as confidence building a rally as one would have hoped,” said Angus Campbell, head of sales at Capital Spreads.
“Investors are still wary as it does not mean Greece is immune to defaulting sometime in the future, and investors continue to keep a close eye on the likes of Portugal, Ireland, Spain and Italy,” Campell added.
Banks provided a boost for the blue chips after the Greek parliament voted through a bill that sets out €3.3bn (£2.8bn) of extra budget cuts for this year alone and provides for a bond swap to ease Greece’s debt burden by cutting the real value of private-sector investors’ bond holdings by 70 percent.
Insurers were in demand as bond default worries eased and equity valuations recovered, with RSA Insurance up 1.8 per cent, helped by positive comment from Nomura ahead of full-year results due on 23 February.
“RSA has performed in line with the FTSE 100 year to date, but has lagged the ‘risk on’ rally, underperforming the DJ Insurance Index by 8 per cent,” Nomura said in a note.
“Hence, the results on 23 February could be a catalyst for the stock. If markets re-trench, on the other hand, RSA should have a less marked correction,” the broker added.
Integrated oils and miners also moved higher on demand hopes as the debt swap deal for Greece lifted some of the uncertainty hanging over the global economic outlook.
Miners were also boosted by more M&A talk following last week’s announcement of the proposed merger between Glencore and Xstrata, with reports Canadian metals and coal miner Teck Resources may be building a stake in Australia’s third-largest iron ore producer Fortescue Metal.
M&A moves also catapulted mid cap Cable & Wireless Worldwide up 44.5 percent, easily the biggest market gainer, after Vodafone Group, the world’s largest mobile operator by revenue, said it was weighing a $1.1bn offer for the telecoms firm. Vodafone shares added 1 per cent.
Credit Suisse said appetite for acquisitions is building, and highlighted financial services group Old Mutual among possible targets. Old Mutual shares added 2 per cent.
On the downside, cruise operator Carnival and airlines group IAG were among the top blue-chip fallers, down 2.5 per cent and 1.4 per cent, respectively, hit by fears over a hike in fuel costs as crude prices rose.
Other defensive stocks accounted for a number of other blue chip fallers, with luxury goods group Burberry off 1.1 per cent and engineer Weir Group down 0.7 per cent, as the appetite for safer assets faded slightly.
“Cyclicals are outperforming defensives by 12 per cent (in the year-to-date), but as long as yields continue to move higher, cyclicals will remain the outperformers in our view,” JP Morgan Cazenove said in a strategy note.