MARKETS SURGE ON BANKING BONANZA
INVESTORS were cheered yesterday as stocks on both sides of the Atlantic surged on the back of strong corporate and economic news.
In the UK, the FTSE 100 index leapt to a 10-month high, closing at 4,682.46 points, its highest level since the collapse of Lehman Brothers last September, while sterling rose on the back of strong half-year results from Barclays and HSBC.
Barclays reported first-half pre-tax profits of £2.98bn, up from £2.75bn for the same period last year, sending its share price up 6.7 per cent to 322.55p.
And HSBC said its pre-tax profits for the six months to the end of June hit $5.02bn (£2.96bn), down from $10.25bn last year but still better-than-expected, helping its shares add 4.72 per cent to close at 634.51p.
The strong results pushed sterling to a 10 month high against the dollar of $1.69 – “an important psychological barrier,” according to Mark O’Sullivan of Currencies Direct.
“The pound is rallying on these releases, as confidence returns to the UK banking sector,” he added.
Meanwhile, the prices of the most traded risky loans in Europe and the US reached their highest level in over a year, in a sign that credit markets were also starting to improve.
Over the past week, European leveraged loans hit 89.11 per cent of face value for the first time since July 2008, according to Standard and Poor’s LCD and Markit. And US loans rose to 90 per cent of face value for the first time since June 2008.
Meanwhile, stocks rose in the US, pushing the S&P 500 index above 1,000 for the first time in nine months, as data on the manufacturing sector underscored optimism that the economy was recovering.
And the Nasdaq closed above 2,000 for the first time since October on a strong earnings season.