Banks help FTSE to end May on a high but fear still reigns
BANKS and energy stocks, buoyed by hopes of a second bailout for Greece, helped Britain’s FTSE 100 higher yesterday, but traders remained concerned about buying momentum in the short-term.
“Uncertainty for the near term outlook still remains bearish until the markets can pick up positive momentum and clear hurdles to give the bulls a chance to see higher prices for June,” Sandy Jadeja, chief technical analyst at City Index said.
The FTSE 100 closed up 51.12 points, or 0.9 per cent, at 5,989.99, but drifted away from a session high of 6,009.98. The index fell 1.3 per cent in May.
“Although the first few days of June look positive it will be the closing prices for the week ahead that may provide a clue for the monthly outlook,” Jadeja said, warning the FTSE had formed a double top at around 6,100, signalling the potential for further declines.
“Of course, if there’s one lesson we have learnt over the past 12 months about the sovereign debt crisis, it is that it does have a tendency to rear its ugly head repeatedly, and with shares in London bouncing back by around four per cent in the last week, some are concerned that this is quite far enough for now,” said Yusuf Heusen, senior sales trader, at IG?Index.
Banks were higher as Europe stepped up efforts to draft a second bailout package for Greece.
Standard Chartered rose 1.4 per cent as Nomura upgraded the bank to “buy”.
But Lloyds retreated 1.4 per cent, with traders citing concerns over the bank placing its bonus scheme under review, potentially driving away the bank’s top talent.
Traders also said there were worries, sparked by newspaper reports, of a return to high-risk mortgage lending, raising fears of the potential for another credit crunch scenario.
The euro climbed to a three-week high against the dollar, as European officials met in Vienna to sketch out options for another bailout package.
The weak dollar lifted crude oil prices, which boosted integrated oils, but BG Group fell 0.3 per cent, as Credit Suisse cut its target price for the firm.
Plumbing supplies firm Wolseley climbed 3.4 per cent, ahead of its trading update today. The company was also boosted after the Sunday Times reported the plumbing supplies firm has put three of its UK businesses – Build Center, Electric Center and Encon – up for sale.
Industrial conglomerate Johnson Matthey found support ahead of results tomorrow, rising 4.6 per cent.
“We expect 2011 to be Johnson Matthey’s best year so far,” RBS said in a note, adding it sees margins in the second-half of 2011 at 16.2 per cent, up about 40 basis points compared to the first-half of 2011.
Broker support helped lift Experian 3.1 per cent, as Credit Suisse raised its rating for the credit checking firm to “outperform” from “neutral”.
Bullish broker comment buoyed motor insurer Admiral Group. The firm’s shares rose 2.1 per cent as Collins Stewart repeated its “buy” rating following last week’s decision by the UK regulator against a total ban on referral fees.
Serco rose 3.5 per cent after the London-based outsourcer agreed to buy Indian private sector outsourcing company Intelenet for up to £385m, which brokers view as expensive but strategically significant.