London breaks five days of losses on strong US earnings
BRITAIN’S leading shares broke a five-day losing streak yesterday after upbeat corporate earnings from the US and positive mergers and acquisitions sentiment spurred a rebound, led by banks and commodities.
The FTSE 100 closed up 75.18 points, or 1.5 per cent, at 5,214.64, having shed 2.5 per cent over the previous five sessions.
UK Banks were given a lift as US peer Morgan Stanley reported higher than expected second-quarter profit.
Barclays was a top performer in the sector, up 1.9 per cent, with investors also awaiting the results of European bank stress tests, due out on Friday.
Soft drinks maker Coca-Cola also beat the Street expectations, with Google earnings due after the close.
“We expect the markets to bounce around like a cork in the bath for the next three months responding to good and bad news accordingly,” said David Buik, senior partner at BGC partners.
Buik expects the FTSE 100 to be range bound between 5,000 and 5,300 until the year-end but in the short term sees no reason to desert equities when the signals out of certain companies are encouraging.
Integrated oils were led higher by BP, up 3.2 per cent after the company announced the first asset sales to help pay for the worst oil spill in US history.
Reflecting the market’s appetite for risk, miners were on the front foot along with firmer metal prices.
BHP Billiton gained 2.5 per cent after reporting a 16 per cent jump in quarterly iron ore output, although it voiced caution on the short-term outlook for commodity markets.
Peer Kazakhmys was the top FTSE gainer, up 7.0 per cent, while Antofagasta added 4.8 per cent.
Household and personal-care products firm Reckitt Benckiser gained 3.5 per cent after agreeing a £2.5bn takeover of mid-cap condom maker SSL International, which leapt over 33 per cent higher.
M&A possibilities were a spur to gains by tour operator TUI Travel, up 3.2 per cent after the Daily Telegraph’s market report suggested a possible mop-up bid by 54 per cent shareholder TUI of Germany, citing a recent Morgan Stanley note.
Revived talk of a possible takeover move also resulted in hedge fund manager Man Group adding 3.1 per cent.
Other big gainers included British Airways, up 5.4 per cent after the US approved a bid by the Oneworld alliance to broaden a transatlantic tie-up and cooperate over scheduling, pricing and other services.
On the downside, Smith & Nephew fell 4.5 per cent after investors weighed up disappointing results from US orthopaedics peer Stryker
Talk Citigroup had placed 8 million shares in Smith & Nephew at 559p each was also a drag on the stocks.
Cable & Wireless Worldwide dropped 4.8 per cent as brokers continued to cut their ratings and estimates on the firm, following Tuesday’s downbeat trading update.