Signs of a solution in Greece send the FTSE edging higher
BRITAIN’S top share index closed modestly higher yesterday, supported by oil and banking stocks after BG Group reported strong results and Greece moved closer to securing a bailout package that will avert a chaotic default.
The FTSE 100 closed 19.54 points or 0.3 per cent higher at 5,895.47 after hitting a six-month intraday high of 5,916.31 in the afternoon, when Greek political leaders agreed on reforms required to receive a new rescue package and the European Central Bank opened the door to helping Athens.
Banking stocks extended gains after the announcements as the prospect of a disorderly default by Greece receded.
But the sector pulled back in late trade and the FTSE fell back into the tight range seen this week, with volume just slightly above the anaemic average of the last 90 days.
“As it had such a great run last week, you’re seeing some rotation, some people taking profit, others eager to get in because they saw the break of the trendline,” said Anders Söderberg, chief technical analyst at SEB Merchant Banking.
“The market will try to be higher but it will fail and fall back to check and probably validate the trendline that we saw last week.”
Traders said the price consolidation and thin trading volume signalled investors were reluctant to build on last week’s rally with so much uncertainty still surrounding the Eurozone’s debt crisis and Europe’s growth prospects.
“The market is doing well and we’re officially in bull market territory but I think that at this level it needs a little bit more volume,” said Andy Ash, head of sales at Monument Securities.
He added a number of institutions and hedge funds were preferring high-yielding credit to equities and argued it would take a solid second long-term refinancing operation (LTRO) by the ECB to provide banks with more money and reassuring economic data out of Europe later this month to convince them to go back into shares.
His views echoed those of David Coombs, head of multi asset investment at Rathbones, who used part of the cash hoarded in 2011 to buy credit. The fund manager said he remained sanguine on equities although the recent rally had moderated his bullish stance.
He favoured oil stocks, which he saw as poised to benefit from a high crude price environment, underpinned by encouraging economic growth prospects in emerging markets.
British oil and gas giant BG Group was among the top risers on the FTSE yesterday after posting a forecast-beating jump in fourth-quarter profits and saying it expects strong growth in production and earnings.
Curbing gains on the index were miners, which fell 0.3 per cent after Rio Tinto reported a second-half net loss and unveiled a gloomy medium-term outlook for its struggling aluminium business.
Tate & Lyle, the maker of food ingredients, was bottom of the blue-chip table, falling 3.2 per cent after saying it expects net debt for 2012 to be higher than last year as a result of higher corn prices and exchange rates.
Among other fallers after results and trading updates, engine maker Rolls-Royce dropped 1.9 per cent and British Land fell 2.2 per cent.