Strong results nudge FTSE up in spite of US debt stalemate
BRITAIN’S top shares managed modest gains yesterday as solid results from blue-chips including drugmaking group GlaxoSmithKline and energy firm BG Group more than offset an earnings miss from heavyweight BP.
Volume on the FTSE 100 was thin, however, as investors waited for clarity from US debt ceiling talks.
The UK benchmark index ended up 4.47 points, or 0.1 per cent, at 5,929.73, having traded within a 55-point range.
Gains were capped by data showing anaemic British economic growth and an Italian debt auction that reignited investors’ worries over the Eurozone debt crisis.
A glance down the risers’ list, however, gave investors plenty to be optimistic about in terms of corporate earnings.
BG Group was the best riser, up 4.3 per cent, after posting a 27 per cent jump in profits for the second quarter, boosted by higher crude prices.
GlaxoSmithKline advanced 0.7 per cent as quarterly profits came in markedly higher than a year ago, when it took a huge legal charge.
It prompted Seymour Pierce to repeat its “buy” rating. The broker said Glaxo’s drugs pipeline remains one of the best in the industry.
Anglo American firmed 1.2 per cent, outperforming a weaker mining index, after its 45 per cent-owned De Beers, one of the world’s largest diamond producers, posted a 55 per cent rise in core first-half earnings.
BP, however, fell 2.6 per cent after its underlying results fell short of analysts’ forecasts and as it benefited less than rivals are expected to from a 50 per cent rise in crude prices from the same period in 2010.
Its shares contributed nearly nine points to the downside.
Traders said the FTSE 100 is likely to put in future lacklustre showings as long as Democrats and Republican rivals are deadlocked over competing plans to raise the debt ceiling.
“The FTSE is pretty quiet today as we are waiting for the US government to find a solution to the debt limit problem,” said Lex van Dam, hedge fund manager at Hampstead Capital, which has about $500m of assets under management.
“If that gets resolved I expect the market to have a relief rally. If it doesn’t get resolved … well, I’d rather not think about that.”
“Investors should probably use this as an opportunity to take advantage of weaker prices and cheap valuations to buy into long-term equities,” said Henk Potts, market strategist at Barclays Wealth.
“The overwhelming likelihood is a compromise deal will be done and a good deal of nervousness will start to disappear.”
Vodafone took second spot on the blue-chip leaderboard, up 1.8 per cent, after RadioShack Corp chose Verizon Wireless, the British firm’s US joint venture with Verizon Communications, as its partner.
On the downside, chipmaker ARM Holdings fell 3.3 per cent after it sounded a note of caution about its expected sales over Christmas.
Luxury goods firm Burberry slumped 3.2 per cent ahead of results from rival LVMH after the market closed, which beat expectations.
Outside the top flight, Holidaybreak was again among the biggest risers, gaining 12.1 per cent, after its takeover suitor was confirmed as Indian firm Cox & Kings.
Cranswick was the biggest faller, off 14.9 per cent, after it issued a profit warning.