Banks lead the FTSE higher and bulls reboot interest in sofware companies
THE FTSE 100 sprung to life yesterday, driven by banks which were led higher by confirmation of Lloyds Banking Group’s rights issue and the announcement that Sir Victor Blank would step down as its chairman.
The index erased almost half of last week’s losses, closing 2.3 per cent, or 98.34 points, higher at 4,446.45 points.
“It’s a good start to the week, boosted by Wall Street’s rally in the afternoon, although volume was pretty weak with not a lot about for real direction aside from the Lloyds news,” said Mic Mills, trader at ETX Capital.
SOFTWARE HANGING TOUGH
UK-listed software companies had a rare day in the sun yesterday, after Goldman Sachs raised its estimates to incorporate a more optimistic recovery time frame.
Computer software maker Autonomy benefited the most, gaining 7.99 per cent to close at 1,486p, after Goldman said it remains one of its top picks in the sector and increased its target price for the stock to 2,200p.
Autonomy is on Goldman’s “conviction buy” list as the broker believes it will continue to benefit as the market leader as its technology is adopted across all industry sectors.
Sage Group gained 2.49 per cent, closing at 189.40p, boosted by Goldman’s 40 per cent increase in its target price to 230p.
And over on the mid-cap index, Aveva added 1.12 per cent to close at 586p thanks to its place on the broker’s “conviction buy” list.
BANKS REBOUND
Banks added the most points to the large-cap index, led by Lloyds Banking Group, up 9.87 per cent as favourable changes to the terms of a planned placing and open offer accompanied news its chairman would depart by June 2010.
Barclays was also firmer, up 4.86 per cent to 280.75p, on the back of speculation that Blackrock and Bank of New York Mellon may compete to acquire the Barclays Global Investment unit.
Standard Chartered, HSBC and RBS gained 4.42 to 8.51 per cent.
MIXED METALS
Mining stocks were mixed, however, as copper rallied from earlier falls, but gold fell. Shares in Randgold Resources, a straight proxy for the gold price, fell by 2.1 per cent.
Platinum miner Lonmin lost 2 per cent, while Mexican silver miner Fresnillo shed 3.7 per cent impacted by a Citigroup downgrade to “hold” from “buy”.
The broker comment also knocked Rio Tinto, down 0.5 per cent. An executive at Rio Tinto said roughly half China’s iron ore mines may have shut down since prices for that commodity dropped, opening the door for other low-cost producers to supply China.
But Anglo American, Antofagasta, Xstrata, BHP Billiton, Eurasian Natural Resources and Kazakhmys rose 0.3 per cent to 2.5 per cent.
Energy stocks pushed higher as oil prices rose to over $58 a barrel.
Royal Dutch Shell rose 2.1 per cent ahead of today’s annual meeting, at which key shareholders are expected to vote against the oil giants’ director remuneration plans.
BG Group, BP, and Cairn Energy were 1.4 per cent to 5.2 per cent higher.
Cairn Energy, due to issue a trading update today, has significant exposure in India and it benefited, along with miner Vedanta Resources, up 6.8 per cent, after a decisive election victory for the ruling coalition in that country calmed fears of political instability.
“Cairn Energy and Vedanta are having a good day based on the view that the Congress Party success in the Indian elections will prove favourable over the medium term”, said Manus Cranny, senior market commentator of MF Global Spreads.
Vodafone was in demand ahead of today’s full year results, adding 3.5 per cent.
Other than Vodafone and Shell, full year earnings from Marks & Spencer are likely to make for an interesting day on the markets today – with many asking whether a run back up to the highs of 4,500 is achievable. While not impossible, any disappointment could see the index heading back lower in a trice.