Yesterday's trading: Bounce has whiff of dead cat
Alistair Darling was in wonderland after £89bn was added to bombed-out share values following his well-leaked pre-budget report.
Geoff Foster: Daily Mail
The Footsie soared 372 points, or 9.8%, to close at 4,152.96. The FTSE 250 ended 298 points higher at 5,789.55.
But dealers were adamant that he shouldn't take all of the credit for the biggest points gain since that 'freaky Friday' in September when the index shot up 431 points following a $2 trillion bailout of the global banking system and a temporary ban on the short-selling of bank shares.
Wall Street's spectacular late bounce of 494 points on Friday and 397 point jump yesterday on relief about Citigroup's eleventh-hour rescue gave markets a massive lift.
David Buik, equity guru at BGC Partners, said: 'Please don't kid yourself that today's rally was anything to do with Mr Darling. The borrowing requirements for the next two years of £78bn and £118bn blew my brains away. It was all down to a dead cat bounce and solution to the parlous state of Citigroup.'
Simon Denham at Capital Spreads agreed: 'The moves north are really a reaction to events in the States which has seen a big bounce in anticipation of the fiscal support package going through and a favourable reaction to Obama's choice of Treasury Secretary, Tim Geithner.'
Oversold miners sewed a richer seam as commodity prices moved sharply north. For example, the price of gold bullion for December delivery rose $35, or 4.5%, to $827 an ounce and has rallied 13% in less than a week. Gains stretched to a staggering 28% with copper miner Kazakhmys that much better (49.95p) at 229¾p. Eurasian Natural Resources put on 55¼p to 257p and Xstrata 153p to 808p. Gold miner BHP Billiton rose 182½p to 980p and Rio Tinto 375p to 2450p.
In a lower league, Aquarius Platinum gained 29½p to 135p, Gem Diamonds 36¾p to 253¼p and Randgold Resources 305p to 2378p.
Domestic banks were buoyed by the US government's decision to take a $20bn stake in Citigroup as well as guarantee mega billions of dollars worth of toxic debts. Lloyds TSB, whose shareholders last week voted overwhelmingly in favour of its merger with HBOS (12¾p up at 86p) and £5.5bn fundraising, climbed 22.9p to 147.6p.
International bank Standard Chartered, on the other hand, slumped 34½p to 725p. Investors ran for the exit after it confirmed recent fund-raising gossip and wheeled out a £1.8bn rights issue.
As the oil price gushed $3.5 to $53.50 a barrel, BP advanced 50¾p to 513p and Royal Dutch Shell B 203p to 1640p. Tullow Oil rose 48p to 467p.
Grateful for small mercies, retailers responded with good gains to the cut in VAT to 15% from 17.5%, effective from December 1 to the end of 2009. Whether it gives the high street a major spending boost in the run up to Christmas remains to be seen, but it looks like causing a logistical nightmare. Every price and till in the shops will have to be changed. Marks & Spencer rose 14p to 218¼p, Debenhams firmed 2p to 25¼p and Kesa Electricals 8¼p at 77¼p.
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Fashion retailer Alexon cheapened 1¾p to 13¼p after warning that October-November sales are below expectations with same-store sales of 17 weeks down 11%.
Reckitt Benckiser added 264p at 2781p despite deputy chairman Peter Harf selling 100,000 shares at an average price of 2575.7p.
Industrial engineer Renold added 11p to 38p on talk of a pending circular.
Northern Foods baked up a speculative gain of 5¼p to 55¼p amid gossip that Wagon Wheels food company Burton's, which is owned by private equity group Duke Street, could acquire the Fox's biscuits arm of Northern Foods.
Buying on hopes that today's interim figures come up to scratch helped heating and plumbing services group BSS steam 54¾p ahead to 258¼p. Footsie reserve Serco touched 409¼p before hitting profit-taking to finish 13¾p easier at 384½p.
Aurum Mining jumped 5p to 27½p on news of several bid approaches. Recent speculation has suggested the board intend to significantly cut-back its mining activities and hand back 30p a share to shareholders. Horozonte Minerals hardened a penny to 6¾p after reporting further positive diamond drill results from the Lontra nickel project in Peru.
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