Stocks in London rise on end of US recession and miners
BETTER-than-expected economic growth from the United States and gains in banks and miners pushed Britain’s leading share index 1.1 percent higher yesterday.
The FTSE 100 closed up 57.30 points at 5,137.72, reversing earlier losses, as US data signalled the country had come out of recession.
The index has gained 49 per cent since hitting a low in March, helped by three months of consecutive gains from July to September.
“The GDP figures were actually very good. It reinforces the conviction in the global recovery and that is what the market is responding to,” said Mike Lenhoff, chief strategist and head of research at Brewin Dolphin Securities.
“What it the market needs to see now to move materially higher is more of an indication that this can lead to a sustainable recovery,” he added.
Banks were the biggest blue chip gainers, with Lloyds Banking Group up 7.5 per cent as the lender confirmed it was considering raising capital via a rights issue and debt swap as an alternative to a costly government scheme to insure it against credit losses.
The bank said it was in “advanced discussions” with the British government and regulators over its potential capital raising which could help plug a capital gap of more than £20bn.
Part-nationalised peer Royal Bank of Scotland, also thought to be looking at plans to reduce its exposure to the government’s asset protection scheme, was up 9.5 per cent, while Barclays and HSBC put on 3.5 and 1.4 per cent respectively.
Asia-focused Standard Chartered added 3.7 per cent after it said it was benefiting from growth across its franchises, but cautioned the economic outlook remains fragile.
Mining stocks advanced on the back of a jump in metals prices after above-forecast US growth fuelled demand expectations for commodities while a weak US dollar also helped lift metals prices.
Xstrata, Fresnillo, Anglo American, Antofagasta and Rio Tinto rose 4.2 to 7.5 percent. Kazakhmys gained 6.6 per cent, also benefitting from in-line third-quarter production figures.
Life insurers gained ground, bouncing back from the previous session’s losses, with Prudential, Legal & General, Old Mutual and Friends Provident up 2 to 4.4 per cent.
Bucking the trend, Standard Life fell 0.4 per cent after posting a 15 per cent fall in nine-month sales.
However, the broker Panmure Gordon reckons that Standard Life’s peers could offer better value to investors.