Wall St boosts strangely muted FTSE

A LATE rally helped to rescue a lacklustre session for investors yesterday as financial markets gave a largely muted response to the new UK coalition government.

The FTSE 100 index spent much of the session see-sawing before closing 49.24 points higher at 5,383.45 following a positive start in New York.

Meanwhile the FTSE 250 – often judged to be a more accurate reflection of the UK's economic situation – closed up 210.06 points at 10,186.92.

Michael Hewson, an analyst at CMC Markets, noted: "The FTSE 250 is leading the way in market gains as investors indulge in a spot of feel-good buying."

The Dow Jones Industrial Average was 1 per cent higher when London closed as domestic issues returned to the fore after a week of markets fretting about the euro debt crisis.

The boost for Wall Street came from a report showing US exports jumped in March to their highest level since 2008, signalling an improvement for the manufacturing sector after consistent improvement in recent months.

Currency markets in London were initially reassured by the UK's first coalition government since the war, but this was offset by later comments from the Bank of England that risks to the UK economy remain on the downside.

This prompted analysts to put back their expectations for interest rate rises, causing a reversal in sterling's initial gain against the dollar. The pound retreated from above the $1.5 barrier to near $1.48, while it dipped against the euro after Spain unveiled new spending cuts that helped ease worries about the continent's debt crisis.

Banks were among those in uncertain form, with Royal Bank of Scotland surrendering an initial gain to stand 1.6p lower at 48.4p. Lloyds Banking Group fell 0.8p to 59.5p. Speculation of a takeover move by Standard Chartered for the Nedbank business owned by Old Mutual caused shares in the latter to rise by 4 per cent, or 4.6p to 119p. Standard was 1p higher at 1,703p.

Elsewhere in the top flight, shares in catering giant Compass moved in the right direction after it reported a 14 per cent rise in first-half profits and said it was hopeful of further sales growth in the second half.

It reported a slight acceleration in the rate of new contract wins and said 93 per cent of existing contracts have been retained. Compass shares were 28p higher at 557.5p – the highest level since 2001.

Outside the top flight, shares in ITV rallied 7 per cent despite the Competition Commission's decision that rules designed to protect advertisers from the broadcaster's market dominance should stay in place. ITV shares rose 3.95p to 61.45p.

Barratt Developments – up 6.7p to 123.2p – was another strong riser after it said it expected to report an underlying profit in the second half.

Other housebuilders were on the front foot with Bovis Homes up 13.2p at 395.3p and Persimmon ahead 16.8p at 453.9p.

Logistics and transport group Stobart – which owns the legendary Eddie Stobart haulage chain – rose 4.9p to 155p on new contracts and an improvement in margins, boosting full-year profits by 54 per cent.