Commodities and financials emerge as stars of the index
THE FTSE 100 closed 1.8 per cent higher yesterday, boosted by stronger energy and mining stocks, while financial shares also provided support to the market which had fallen in five of last eight sessions. The index ended 74.96 points higher at 4,202.13, after falling 0.8 per cent on Friday to its lowest close since 28 April.
Trading was lacklustre, with volumes reaching just 67 per cent of the average of the last 90 trading days.
Banks advanced, rebounding from falls earlier in the session, aided by gains in US financials after influential bank analyst Meredith Whitney, who recently founded her own advisory firm, upgraded Goldman Sachs to “buy” from “neutral” and gave a reassuring assessment of the sector’s performance.
Bank of England deputy governor Charles Bean said central bank policymakers were monitoring the situation to see whether more needed to be done to boost the economy, although things were heading in the right direction.
Barclays, HSBC, Standard Chartered, Lloyds Banking Group and Royal Bank of Scotland added between 1.1 and 2.9 per cent.
Friends Provident was the top gainer, adding 12.6 per cent after the life insurer rejected a takeover proposal from Resolution, which fell 2.8 per cent. The sharp rise in Friends’ shares pointed to investor expectations of a sweetened offer and some analysts hailed what could be the first step in a long-awaited consolidation of the sector.
Legal & General, Aviva and Old Mutual took the second, third and fourth spots on the large-cap leaderboard, all rising more than 6 per cent.
Energy stocks added the most points to the FTSE 100, holding onto gains despite crude prices reversing an early rise and falling below $59 a barrel to their lowest in almost two months on concerns over the state of the global economy.
Royal Dutch Shell gained 2 per cent, BP added 2.2 per cent and BG Group firmed 1.5 per cent.
Miners were also on the rise as metals prices firmed. BHP Billiton, Rio Tinto and ENRC rose between 1.1 and 5.3 per cent. Xstrata, however, dropped 2.4 per cent. It said on Sunday it remained committed to a nil-premium merger with Anglo American, up 2.7 per cent, after reports that Xstrata would offer a £5bn sweetener to seal the deal.
A downgrade from RBS weighed on Associated British Foods, off 0.7 per cent, with the bank cutting its rating on the stock to “sell”.