Investors upbeat on debt deal hopes
THE London market gained 1 per cent yesterday after renewed optimism that the US and the eurozone might make progress resolving their debt crises buoyed investors' appetite for risk and boosted banking shares.
Fears that the world's biggest economy might default on its debt repayments due to political brinkmanship eased on reports that progress was being made in raising the US's $14.3 trillion (8.9tn) debt ceiling. The FTSE 100 index rose 63.83 points to 5,853.83 after US president Barack Obama backed a bipartisan plan proposed by six senators.
Yusuf Heusen, senior sales trader at IG Index, said: "Banks have continued to lead the London index higher, although with the eurozone debt crisis set to be squarely in focus (today], many will be looking for a strong, unified conclusion to be delivered."
Meanwhile, it was reported that German chancellor Angela Merkel and French president Nicolas Sarkozy met in Berlin to discuss the terms of a second bailout package for Greece ahead of today's EU summit. The pound was down against the euro, at €1.14, after the single currency was boosted by the reports, but was up against the dollar at $1.61.
Banks benefited from the improving sentiment, helping them continue Tuesday's rebound. Barclays was the biggest riser, up 5 per cent or 11p to 222.6p, closely followed by Lloyds, up 1.8p at 44.9p, and Royal Bank of Scotland, which lifted 1p to 34.1p.
Mining stocks were also on the up as commodity prices rose, with BHP Billiton up 38.5p at 2,364.5p and Rio Tinto 54.5p higher at 4,420.5p.
And BP was 11.4p stronger at 472p after oil prices rose on the back of a report showed US crude inventories dropped more than expected, a sign demand may be improving.
The technology sector in London was lifted by the strong quarterly figures from Apple showing sales nearly quadrupled from a year ago. Chip designer Arm Holdings, an Apple supplier, was up 28.5p to 611p, while Imagination Technologies gained 38.6p to 419p.
Edinburgh-based Wolfson Microelectronics, which supplies chips for smart phones and tablet computers, also felt the Apple effect, with shares up 15p to 180p.
In a quiet session for corporate news, Yell shares fell a further 13 per cent after the directories firm reported another sharp decline in revenues and underlying profits in its first quarter.
The update came a week after debt-laden Yell received a lacklustre response from analysts to its turnaround strategy, which includes a plan to focus on digital services for small- and medium-sized companies. Shares dropped 1p to 6.5p.
Severn Trent edged 13p higher at 1,441p after the water company reported a smaller-than-expected decline in consumption and said it was on track to meet profit expectations.
Mining group Scotgold Resources saw shares gain 5 per cent after it submitted a new planning application for its gold mine in the Loch Lomond and Trossachs National Park.The company said it had addressed issues that led to its last application being rejected and the high price of gold should make returns "considerable". Shares were up 0.25p to 5.13p.