Wall Street helps Footsie cause

Published on Thursday 5 November 2009 20:34

LONDON FTSE 100 CLOSE 5,125.6 +17.8

LONDON'S blue-chip share index staged a sharp recovery yesterday despite a smaller-than-expected 25 billion boost from the Bank of England.

The FTSE 100 index bounced back from a 70-point plunge at one stage to close up 17.8 points at 5,125.6.

An impressive start to trading on Wall Street – with the Dow Jones Industrial Average up 1.5 per cent in the opening hours – helped give the Footsie a boost.

US stocks jumped after encouraging news on jobs and consumer spending, with a fall in the number of newly laid-off workers seeking unemployment benefits and retailers posting their second straight month of sales gains in October.

In London, the Bank of England's small-scale increase to quantitative easing helped the pound and was taken as a slightly more positive sign for the economy, although rate-setters predict a "slow recovery".

The European Central Bank meanwhile kept the cost of borrowing unchanged.

On Wednesday, the US Federal Reserve had said interest rates would remain at record lows for an extended period.

James Hughes, market analyst at CMC Markets, said: "Its been a fairly mixed session for the FTSE today as the a smaller than expected increase in the BoE's quantitative easing programme and a strong open in the US has helped to drag the FTSE from positive to negative.

"The fun is not yet over for this week as Friday sees the release of the all important jobs report in the US. These numbers will take on added importance everyone looks for an improvement in the employment numbers."

In the retail sector yesterday, Tesco surged 9.7p to 418.7p and Marks & Spencer rose another 2.6p to 364.1p as it continued to benefit from Wednesdays better-than-expected results.

Mobile phone giant Vodafone was also making gains, adding 1.45p to 137.45p, while BT – due to announce interims next week – climbed 3.3p to 136.9p.

More defensive stocks were in vogue earlier in the session as investors looked to protect themselves from market volatility and British American Tobacco and Imperial Tobacco held firm in positive territory, closing up 34p at 1,951p and 23p to 1,814p respectively.

Telecoms firm Cable & Wireless led the fallers' board, down 6 per cent, or 9.1p, to 138.9p after plans to de-merge its UK business were overshadowed by the firm downgrading profits guidance for its Caribbean arm.

Alongside Cable & Wireless, British Airways and Royal Bank of Scotland were on the back foot ahead of updates today. Struggling BA shed 5.5p to 186.3p as markets braced themselves for a hefty first-half loss, while RBS was 1.26p lighter at 35.21p a day before it reclaims the spotlight with a Q3 update.

Broadcaster ITV was meanwhile among the top risers in the FTSE 250 following a trading update. ITV added 4.27p, or almost 10 per cent, to 48.8p after it forecast a 4 per cent rise in net advertising revenues in December and said it continued to beat BBC1 in peak-time audience share.

ITV's rise wasn't enough to cheer shares in STV, as the Scottish broadcaster was unchanged at 69.25p.

Grainger, the UK's biggest landlord, dipped as the firm announced plans for a 250 million rights issue. Shares fell 17.8p, or 7 per cent, to 253.6p.

Shares in Alliance Trust fell 0.8p to 306p despite the Dundee-based investment trust naming Legal & General's Alan Trotter as its finance director.

There were mixed fortunes for Scottish stocks in the healthcare sector, with diagnostic kit maker Axis-Shield down 18p at 401p, while drugs firm ProStrakan was up 4p at 110p.