LONDON (ShareCast) - - G8 underwhelms; markets look to EU summit
- Hollande expected to push eurobond idea to Merkel
- Risk-on as financials, miners advance; defensives sold
Londons FTSE 100 finished firmly higher on Monday following a poor performance last week which saw the blue chip index slump to its worst levels since mid-November 2011. Despite the rise though, the mood was still cautious as uncertainty over Greeces future in the Eurozone continued to dampen sentiment ahead of a meeting of European leaders scheduled for Wednesday.
New French President François Hollande is expected to press German Chancellor Angela Merkel for the implementation of the so-called eurobonds (debt issued and backed by the entire Eurozone together) at the informal European Union meeting to be held on May 23rd. Merkel has long opposed immediate implementation of eurobonds because she feels it would hinder member states from becoming fiscally responsible and following through on structural reforms.
Leaders are also expected to discuss the European Financial Stability Facility (EFSF) and the idea of giving it the capability to directly recapitalise struggling European banks, something which Germany has also been long-opposed to.
As expected, the Group of Eight (G8) world leaders this weekend spent a great deal of time focusing on efforts to promote global economic growth and particularly on the Eurozone sovereign debt crisis while showing their support for Greece remaining in the single currency. We agree on the importance of a strong and cohesive Eurozone for global stability and recovery, and we affirm our interest in Greece remaining in the Eurozone while respecting its commitments, the joint communiqué said.
With Germany continuing to oppose relaxing the austerity measures and issuing eurobonds, the options are starting to run out for the ailing Eurozone economies, with some unable to borrow in the open market due to the excessive borrowing costs and Spain and Italy only hanging on in there, said analyst Craig Erlam from Alpari.
In other news, there were rumours that China could act to counter a slowdown after Premier Wen Jiabao called for "putting stabilising growth in a more important position". According to the Chinese Securities Journal, the world's second-largest economy could announce stimulus measures in the near term.
FTSE 100: Financials, resource stocks provide a lift; defensives sold off
The financial and resource sectors were making gains today, rebounding after a poor showing last week as they bore the brunt of the Eurozone-fuelled sell-off.
Hedge fund manager Man Group jumped after saying it is set to pay up to $142.8m for FRM Holdings, a global hedge fund research and investment specialist. Man and FRM's combined multi-manager business will have total funds under management of approximately $19bn, making it the largest independent non-US based fund of hedge funds.
Global banking group HSBC rose after completing the sale of 195 US retail branches to First Niagara Bank for $0.9bn, first announced in July last year.
Barclays was on the rise after announcing its intension to dispose of its entire holding in BlackRock.The transaction will be by way of an offering and related buyback by Blackrock itself, and is likely to cost around £3.8bn based on the valuation at the close of trading last Friday.
Mining stocks were broadly higher on the back of stimulus hopes in China with Vedanta, Polymetal and Xstrata making gains as copper prices ticked higher. However Fresnillo was in the red as precious metals prices came under pressure.
Real estate investment trust British Land rose after revealing profits ahead of expectations and net asset value (NAV) growth in the 12 months to the end of March. Underlying profits before tax rose 5.1% while NAV grew 4.9%.
Defensive stocks were firmly out of favour today as investors tapped into riskier assets. Utility peers Centrica, United Utilities, Severn Trent and SSE were among the worst performers of the day.
FTSE 250: Resources on the rise, Lamprell drops after downgrade
Resource stocks were leading the risers on the second-tier index as copper and oil prices edged higher. Heritage Oil, Petropavlovsk, Afren, Ferrexpo, Cairn Energy, Wood Group and Talvivaara Mining all made decent gains.
Heading the other way though was oil, gas and energy engineer Lamprell after Nomura downgraded its rating from buy to reduce on the back of last week's profit warning. "We believe Lamprells execution and operational strategy is fundamentally at risk and we were wrong to previously assume the company had turned a new leaf. In our view, the root cause of the problems announced lies with managements inability to execute lump-sum contracts," analysts said.
Newsletter publisher and exhibitions organiser Informa fell after sticking with its full-year guidelines despite admitting that renewal and new subscriber cycles are taking longer than they used to.
FTSE 100 - Risers
Vedanta Resources (VED) 1,008.00p +5.16%
Man Group (EMG) 78.80p +4.65%
Royal Bank of Scotland Group (RBS) 20.80p +4.05%
Polymetal International (POLY) 828.00p +3.63%
Standard Chartered (STAN) 1,328.50p +3.26%
Xstrata (XTA) 943.00p +3.09%
Tullow Oil (TLW) 1,373.00p +2.77%
IMI (IMI) 881.50p +2.68%
Weir Group (WEIR) 1,503.00p +2.52%
Aggreko (AGK) 2,084.00p +2.46%
FTSE 100 - Fallers
Fresnillo (FRES) 1,319.00p -2.87%
Centrica (CNA) 310.60p -1.40%
Aberdeen Asset Management (ADN) 237.90p -1.33%
Tesco (TSCO) 311.15p -0.81%
United Utilities Group (UU.) 617.50p -0.80%
Severn Trent (SVT) 1,644.00p -0.66%
SSE (SSE) 1,325.00p -0.60%
Antofagasta (ANTO) 1,030.00p -0.48%
Rolls-Royce Holdings (RR.) 801.00p -0.44%
BT Group (BT.A) 203.20p -0.39%
FTSE 250 - Risers
Heritage Oil (HOIL) 124.60p +8.25%
Petropavlovsk (POG) 411.60p +5.11%
Kesa Electricals (KESA) 50.85p +4.85%
Henderson Group (HGG) 96.40p +3.82%
Inchcape (INCH) 323.30p +3.56%
Salamander Energy (SMDR) 165.00p +3.45%
Wood Group (John) (WG.) 709.00p +3.43%
Ferrexpo (FXPO) 218.10p +3.36%
Cape (CIU) 331.90p +3.04%
Cairn Energy (CNE) 294.40p +2.94%
FTSE 250 - Fallers
Ocado Group (OCDO) 101.10p -6.65%
Northgate (NTG) 171.00p -6.10%
Daejan Holdings (DJAN) 2,725.00p -4.55%
RPS Group (RPS) 206.50p -3.82%
Informa (INF) 369.60p -3.72%
Savills (SVS) 312.20p -3.61%
TR Property Inv Trust Sigma Shares (TRYS) 61.40p -3.31%
Lamprell (LAM) 117.00p -3.31%
Rathbone Brothers (RAT) 1,151.00p -3.28%
Dunelm Group (DNLM) 492.50p -3.24%