London rises on comments by Fed chairman Bernanke
BRITAIN’S top share index closed higher yesterday, lifted by gains in miners and banks, as investor appetite for risk was boosted by positive comments on the US economy from Federal Reserve Chairman Ben Bernanke.
The FTSE 100 closed up 57.71 points, or 1.2 per cent, at 5,085.86, after a choppy session which saw the index hit an intraday low of 4,998.06, in the wake of Tuesday’s 0.8 per cent fall.
The mood brightened after Bernanke said yesterday the US economic recovery was on solid footing, but cautioned it could be years before the jobs lost during the deep recession are restored.
Miners were in demand on firmer metals prices as sources pointed to a surge in China’s total exports in May, ahead of the data’s official release on Thursday.
Fresnillo, Kazakhmys and Xstrata were the best off, adding 4 to 4.6 per cent.
Banks found favour as bargain hunters moved in on a sector which has fallen on worries over potential exposure to the Eurozone debt crisis and the punitive levies European governments may place on lenders’ earnings.
Barclays, HSBC, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered rose 1.4 to 3.3 per cent.
The British blue-chip index has fallen 12.7 per cent since mid-April, as growth concerns sparked by Europe’s debt crisis dented investor confidence.
“The optimistic signs are that equities are spectacularly cheap against gilts, and that the 5,000 level has proved remarkably resilient so far,” said Jim Wood-Smith, head of research at Williams de Broe.
Williams de Broe’s Wood-Smith added: “On the pessimistic side of it, if the US indices are going to set the trend, then the Dow and the S&P have both been down below important support levels.”
Among individual movers, InterContinental Hotels Group, the world’s largest hotel group by number of rooms, climbed 3.9 per cent as it began a two-day event for analysts and investors in New York.
The hotelier was also boosted by a read-across from peer Marriott which said room rates at its North American hotels rose for the first time in two years during May.
BP topped the list of blue-chip fallers, off 4.2 per cent, following a five per cent decline on Tuesday, on worries that the company will have to suspend its dividend payment under pressure from American politicians who say it should go to pay for legal claims and environmental damage in the Gulf.
Peer Royal Dutch Shell slipped 0.5 per cent.
Britain’s goods trade deficit with the rest of the world was wider than expected in April, after disruption to air traffic as a result of the Icelandic volcanic ash cloud hit both exports and imports, official data showed.
Johnson Matthey fell after trading ex-dividend.