FTSE rises after upbeat Wolseley results outweigh bank dips and debt worries
THE FTSE 100 rose moderately in light trade yesterday with support from miners and upbeat results from Wolseley outpacing falls in banks on European debt worries.
The FTSE 100 climbed 27.68 points, or 0.5 per cent, at 5,932.17. The index regained more than 3 per cent the previous week following losses sparked by the earthquake in Japan.
“The fact that the FTSE has remained at these levels showing little signs of weakness when there is so much negative news out there shows just how much underlying strength there is in the market,” Angus Campbell, head of sales at Capital Spreads, said.
Trading volumes were 77 per cent of the index’s average 90-day volume as investors approached the end of a tumultuous month cautiously, hoping jobs data from the United States on Friday will provide a catalyst for the index’s next move.
“It’s a big data week with the (US non-farm) payrolls on Friday and that could see us get more positive momentum,” Steven Bell, director at the GLC hedge fund said.
The FTSE remains in a range near its 50-day moving average of around 5,933 and above its 20-day moving average of around 5,791. The index has traded below its 50-day moving average since 4 March.
Investors bought into growth stocks as Wolseley, the world’s largest plumbing and building merchant, gained 2.1 per cent after posting a 64 per cent rise in half-year trading profit and reinstating its dividend.
Wolseley’s shares trade at a price around 17 times the company’s prospective earnings per share, compared to the sector average of around 12 times according to Thomson Reuters data. Analysts saw more upside potential.
“Wolseley has plenty of recovery potential in terms of both earnings and for further deleveraging of the balance sheet,” Charles Stanley’s analyst Tony Shepard said.
Miners were firmer after a weak showing on Monday. Vedanta was up 2.9 per cent with traders citing recent upbeat broker comment surrounding its pending purchase of Cairn India, which they say could be 30 per cent earnings accretive.
Hedge fund firm Man Group rose 0.7 per cent after it said it expects $700m of net inflows in the three months to March.
Clothing retailer Next added 1.9 per cent, with traders citing a bullish note from Morgan Stanley.
Intercontinental Hotels rebounded 4 per cent along with hotel operator Marriott International after the U S firm gave a disappointing update on its revenue outlook on Monday.
On the downside, the previous sessions top gainers the banks were lower after Italy’s UBI Banca surprised markets by announcing a €1bn capital hike to help repay a government bond.
Analysts said UBI Banca had reignited worries over Europe’s debt crisis and there were concerns other Italian banks could follow suit.
Ratings agency Standard & Poor’s downgraded Greece’s debt deeper into junk status and cut its credit rating on Portugal by one notch.
BP, down 2.2 per cent, took 8 points off London’s blue chip index, with traders citing a downgrade to “sell” by Collins Stewart and a media report that the company’s managers may face manslaughter charges.