Recessionary data brushed off as FTSE mirrors gains seen on Wall St
THE UK’s blue-chip index closed up yesterday, shrugging off weak UK GDP figures showing Britain slipped back into recession and disappointing first-quarter results from drugmaker Glaxosmithkline, as investors awaited results from a key US Federal Reserve meeting.
Early gains on the FTSE 100 index were led by a rise on Wall Street, which opened up almost one per cent as better-than-expected results from Apple boosted equity markets.
That helped the UK’s blue-chip index shrug off weaker-than expected GDP data, which showed growth in the British economy declined for a second successive quarter.
“The positive nature of Apple’s first-quarter results after hours [on Tuesday] has encouraged short-term investors at least to overlook continuing travails of the Eurozone, which is a region the markets can’t get past because the crisis continues to escalate but there are periodic sideshows that allow them to overlook it and today’s is the FOMC meeting,” said Jeremy Batstone-Carr chief economist and strategist at Charles Stanley.
The index closed marginally higher, up 0.16 per cent or 9.4 points at 5,718.89.
Firmer miners also provided support for the blue chips, adding around 12 points to the index as investor appetite for risk-sensitive stocks returned, with copper prices holding steady.
India-focused miner Vedanta led risers on the index with a 4.3 per cent gain, while Xstrata and Rio Tinto gave the index a boost with gains of three and two per cent respectively.
Banks gave up much of their daily gains before paring back to add six points to the index following comments from French presidential candidate Francois Hollande towards the close.
“We saw some comments from the socialist candidate Francois Hollande that France would not ratify the fiscal compact, so it [the fall in banking stocks] is probably worries about the limbering Franco-German clash if he does take power,” said Chris Beauchamp, market analyst at IG Index.
Shares in Britain’s biggest drugmaker GlaxoSmithKline were among the top fallers, with a three per cent dip, after the firm released disappointing first-quarter results, insisting its $13 a share offer for a US-based bio-tech firm was generous and chief executive Andrew Witty played down the possibility of increasing the price. The drugmaker also said its $2.6bn bid for long-time partner Human Genome Sciences was “full and fair” and it was the only obvious owner for the US bio-pharma firm.
Ex-dividend factors, stocks trading without their dividend entitlements, accounted for most of the top blue chip fallers, with Centrica closing down 3.8 per cent, Man Group shedding 1.9 per cent, Reed Elsevier faltering 2.6 per cent and Tesco losing 2.6 per cent on the day.
Apple’s strong performance also boosted its chip designer ARM Holdings, which saw its share price rise 4.2 per cent, initially topping the list of FTSE 100 risers before paring back for a 1.1 per cent gain on the day.
The British software company, was upgraded by broker Jefferies to “hold” from “underperform” on valuation grounds.