FTSE 100 week: Year high just out of reach
A year on since the collapse of Lehman Brothers, the FTSE 100 rallied further towards the level of its 12-month high.
Footsie action: We round up the week's trading
The index of the UK's largest firms pushed ahead another 3%, or 161.42 points, this week to cross the finish line at 5,172.89 as encouraging comments from US Federal Reserve chairman Ben Bernanke lifted markets worldwide.
While it still has not reached its peak over the past year of 5,311.3p, the top-flight is now some 47% up on its March low.
David Buik, a partner at broker BGC, says: 'Many believe that we have been watching a huge bubble in the making, thanks to intervention by the Federal Reserve – hence the rally in banking, hi-tech and industrial stocks and the improvement in the housing market.
'These people think that the rally has little or nothing to do with the green shoots of recovery: it is all about the liquidity the Fed has provided for the banks, which has resulted in the stock market being run up, setting it up for a gigantic crash at some point.'
Banks benefited from soothing, if cautious, words on the economy from Bank of England Governor Mervyn King as further gains were notched up this week.
Barclays is 1% better off at 373.65p while Royal Bank of Scotland is up 1% at 56.3p.
The government's tightening of the terms for Lloyds Banking Group to exit its asset-protection scheme didn't stop the group rising 5% to 110.67p but it was HSBC leading the sector and the whole index higher over the week with a 12% jump to 730p.
Also scrambling up the index with Europe's biggest bank was Tullow Oil after firming 8% to 1,179p.
The London-listed African exploration company announced two oil discoveries in two days. Its partners made a major new oil discovery along the West African coast from Sierra Leone to Ghana and that it may have hit its best ever find in the rift basin of Lake Albert in Uganda.
Other oil group's made progress too – BP is ahead by 2% to 555p and Royal Dutch Shell is 4% up at 1,796p. But BG Group, after unveiling another new discovery in the Santos Basin, finished relatively flat at 1,139p.
In the clothes retail sector, Next, another one of the week's top risers, upgraded its annual profit forecast for the third time in five months and posted a 6.9% hike in half-year earnings. Its shares over the week are up 9% to 1,870p. But Morgan Stanley lifting forecasts and raising its target price, did not help retailer Marks & Spencer make much ground, it finished flat at 368.5p, while Home Retail Group, rose 1% to 295.3p.
Kingfisher announced a bumper profit rise of 35% thanks to strong sales at DIY chain B&Q amidst greater optimism for the housing market, over the week its stock is 2% better at 211.7p. BT gained 8% to 139.45p, after broker Credit Suisse upgraded to outperform from neutral and raised its target price to 170p while British Airways, which is said to be interested in UK rival BMI and has spoken to its German owner Lufthansa about a deal, jumped 6% to 235.7p.
Among the miners Fresnillo put on 6% to 782p, platinum specialist Lonmin, added 1% to 1,744p, Xstrata firmed 4% to 965p and Randgold Resources completed the week 5% better off at 4,572p.
Cadbury, which rejected the approach from US food giant Kraft last weekend, added 2% to 792p. A letter from Cadbury chief, Roger Carr, to Kraft chairman and CEO Irene Rosenfeld said that the Kraft takeover proposal fundamentally fails to reflect its current value. But the story unveiled a new twist this week when it emerged that US chocolate giant Hershey looks set to wade into the takeover battle after appointing bankers to advise it on a bid.
Shares in Irish banks soared following news that the government is to extend its 100% savings guarantee beyond 2010. Bank of Ireland is up 20% to €3.26 while Allied Irish Bank jumped 28% to €3.32. The banks are now up 838% and 532% respectively over the past six months.
Within the FSTE 250, ITV dropped back, 11% to 48.4p after regulators rejected changes to its ads policy. The UK's largest free-to-air commercial broadcaster has been seeking to relax the rules that mean the prices it charges for advertising slots are capped. However, the Competition Commission announced that the regime will not be relaxed by as much as ITV had been hoping for.
Also on the FTSE 250, the pub groups took a battering, with Enterprise Inns, off 14% at 147.7p and Punch Taverns, down, 10% to 124.2p. Doing better was Synergy Healthcare, after rising 14% to 647p while property group DTZ, cheered 16% to 110p after the group declared that trading is in line with market expectations at its annual general meeting.
THE WEEK AHEAD
After the FTSE 100's latest re-shuffle, Monday will see Whitbread, Rentokil Initial and European property firm Segro join the top flight while those being relegated from the blue chips are construction and engineering group Balfour Beatty, investment company Foreign & Colonial Investment Trust and waste management firm Pennon Group.
Trading statements arrive from Severn Trent and Imperial Tobacco on Tuesday and from United Utilities on Wednesday, with private equity group 3i following on Thursday, when the troubled JJB Sports also publishes interims.
The Bank of England Monetary Policy Committee will release the minutes from its latest meeting in which it agreed to keep rates on hold and to make no change in quantitative easing and the British Bankers' Association will publish its latest lending data.
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