Goldman profits stoke investor hopes

LONDON FTSE 100 CLOSE 5,783.69 +55.78

GOLDMAN Sachs' forecast-beating results boosted the London market yesterday as stocks regained some of the recent losses sparked by fraud allegations against the bank.

The US investment giant posted first-quarter net profits of $3.5 billion (2.2bn), surpassing strong Citigroup results on Monday and beating Wall Street profit hopes.

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Results from Goldman and Bank of New York Mellon added to investor conviction that the recovery from a sharp recession is gathering pace.

John Haynes, head of research, Rensburg Sheppards, said: "Results are bearing out hopes of a virtuous circle.

"Stronger earnings are feeding into healthy company balance sheets, which is putting pressure on managers to deploy growing reserves into investment, which will lead to higher employment."

The FTSE 100 Index closed 55.78 points, or almost 1 per cent, higher at 5,783.69 as positive corporate news from many blue chips gave a further lift to sentiment in London.

The index is up 6.9 per cent so far this year, following a 22 per cent rise in 2009.

Wall Street's Dow Jones Industrial Average added to overnight gains in early trading as markets bounced back from two difficult sessions following the fraud claims against Goldman which emerged on Friday.

The firm is now also the subject of a formal investigation by the UK's Financial Services Authority as well as a civil lawsuit from US regulators.

In London, official inflation data came in worse than expected at 3.4 per cent, but this did little to dent sentiment.

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March's faster than expected rise in the cost of living gave sterling a boost. The pound rose 0.5 per cent against the euro to 1.14 and climbed 0.2 per cent against the US dollar to $1.53.

Only a handful of stocks were in negative territory, with the Footsie led higher by Associated British Foods, which owns discount clothes chain Primark.

AB Foods rose 56.5p, or 6 per cent, to 1,015p as brokers hailed a 20 per cent rise in pre-tax profits for the first half. The group is confident of "very good progress" for the year.

Meanwhile, SABMiller, which brews Peroni, gained 86p, or 4 per cent, to close at 1,996p after growing revenues in the three months to 31 March amid signs of recovering consumer demand in emerging markets.

Banks were also well represented on the risers board following Goldman's results, with Royal Bank of Scotland maintaining its recent run by adding 2.3p to 52.7p, and Lloyds Banking Group up 1.8p to 67.2p.

But supermarket giant Tesco led the fallers as investors failed to be inspired by full-year profits of 3.4 billion at the top end of City hopes. Shares eased 6.45p to 431p as the firm predicted a slow and steady pull out of recession for its main UK market.

Rival Morrisons was 1.3p lower at 294.4p.

Luxury fashion label Burberry was another faller, down 6p to 695.5p, despite forecasting profits "slightly ahead" of City hopes.

TUI Travel, which owns Thomson Holidays, edged up 1p to 289.2p after losing ground earlier. Disruption from Iceland's volcanic ash cloud is costing it up to 6 million a day.