FTSE Close: Banks, BT up; Miners down

By Reuters
Updated: 12:16 EDT, 18 October 2010

17.00 (close)

Better-than-expected quarterly results from Wall Street giant Citigroup gave the London market a boost today as banking stocks rose higher.

Citi, which is 12% owned by the US government, made earnings of $2.15bn (£1.4bn) between July and September - beating market forecasts and raising investor hopes for a decent third quarter reporting season from banks worldwide.

The FTSE 100 Index closed 39.2 points higher at 5742.5, while the Dow Jones Industrial Average in America also rose after the news.

US data showing improved home-builder confidence also provided encouragement, offsetting disappointing news that industrial production slipped 0.2% in September.

Banking stocks were among the main gainers on the Footsie following the results, with Lloyds Banking Group advancing 2p to 72.2p, Barclays ahead 4.25p at 289.25p and HSBC up 7.1p at 660.4p.

BT continued to rise after a statement on Friday allayed fears about the telecom firm's exposure to government spending cuts.

The group, which is one of Whitehall's largest suppliers of IT network services, has signed an agreement that means all of its contracts remain in place. Shares rose another 1% or 2.2p to 149.6p today.

But there was pressure on mining stocks caused by a rebound for the beleaguered US dollar.

A signal from Federal Reserve chairman Ben Bernanke that more quantitative easing was on the cards dealt a fresh blow to the greenback on Friday, leaving it at a nine-month low against the pound.

The dollar fought back from last week's lows today, with the pound falling to just under 1.59 dollars.

Randgold Resources featured on the fallers board with a drop of 145p to 6420p, while a fall in copper prices and a downgrade from HSBC meant Xstrata eased 6p to 1305.5p.

Miners Rio Tinto and BHP Billiton were also weak after plans for an iron ore joint venture in western Australia were called off in the face of opposition from regulators in Australia, Europe and Asia.

The setback had been expected by investors, limiting the decline in the two share prices as BHP fell 14p to 2185.5p and Rio Tinto dropped 63p to 4080p.

In corporate news, Vertu Motors soared 18% after it posted a rise in first-half profits and said it was trading ahead of expectations following a strong new car performance in the key trading month of September. Shares were 4.5p higher at 33p.

Shares in Peroni Nastro Azzurro brewer SABMiller were up after the company posted a rise in sales volumes in the six months to September 30, helped by double-digit gains in lager volumes in Asia and Africa. Shares rose 9.5p to 2069p.

The biggest Footsie risers were Autonomy Corporation up 71p to 1419p, Lloyds Banking Group up 2p to 72.2p, Arm Holdings ahead 11.1p to 399.1p and 3i group up 7.9p to 302.3p.

The biggest Footsie fallers were Randgold Resources down 145p to 6420p, Kazakhmys off 25p to 1359p, Rolls Royce down 11p to 624p and Vedanta Resources down 35p to 2253p.

15.45: Markets on both sides of the Atlantic lifted after US banking giant Citigroup posted better-than-expected quarterly profits.

The New York Stock Exchange-listed bank, which is still 12% owned by the US government, made a pre-tax profit of $2.2bn (£1.4bn) between July and September.

The Dow Jones lifted 54 points to 11,117.3 following the results, while the optimism spilled over to London, where the FTSE 100 was ahead 39.6 points at 5,743 despite pressure on mining stocks caused by a rebound for the beleaguered US dollar.

Banking stocks were among the main gainers on the Footsie following the results, with Barclays ahead 3.5p at 288.5p, HSBC up 6.7p at 660p and Lloyds advancing 1.8p to 71.9p.

BT continued to rise after a statement on Friday allayed fears about the telecom firm's exposure to government spending cuts.

The group, which is one of Whitehall's largest suppliers of IT network services, has signed an agreement that means all of its contracts remain in place. Shares rose another 2% or 2.7p to 150.1p.

12.30

The FTSE 100 index is holding firm despite pressure on mining stocks caused by a rebound for the beleaguered US dollar.

A signal from Federal Reserve chairman Ben Bernanke that more quantitative easing was on the cards dealt a fresh blow to the greenback on Friday, leaving it at a nine-month low against the pound.

However, a modest recovery caused oil and gold prices to fall back and left mining stocks down by around 2%. The Footsie, which initially fell by around 30 points, benefited from a solid session for banks to stand 10.9 points higher at 5,714.3.

IG Index sales trader Will Hedden said events later in the week were likely to test the London market's recent strength.

He added: 'After bursting through 5,750 temporarily last week, and the subsequent sell-off on Thursday and Friday, it will be interesting to see whether the FTSE 100 can sustain the strong sentiment seen recently, especially with the all-important spending review in store midweek.

'Platinum firm Lonmin featured on the fallers board with a drop of 28p to 1,803p, while a fall in copper prices and a downgrade from HSBC meant Xstrata eased 28p to 1,283.5p and Antofagasta dipped 28p to 1279p.

Miners Rio Tinto and BHP Billiton were also weak after plans for an iron ore joint venture in western Australia were called off in the face of opposition from regulators in Australia, Europe and Asia.

The setback had been expected by investors, limiting the decline in the two share prices as BHP fell 32.5p to 2,167p and Rio Tinto dropped 80p to 4,063p.

Oil majors BP and BG Group were up 1.6p to 427.1p and 17p to 1,184.5p respectively.

The world's largest listed hedge fund Man Group, which has been firmer on bid speculation recently, added 5.5p to 269.5p with traders saying despite their recent rally they are still seeing further upside for the stock.

Retailers were weak as investors awaited the British government's Comprehensive Spending Review on Wednesday, which is expected to involve a swathe of cuts to the public sector that could hit consumer spending. Tesco was off 0.3% or 1.3p to 433.7p.

Lloyds Banking Group neared the top of the risers board with a gain of 1.4p to 71.6p after Goldman Sachs increased its target price for the stock.

BT also continued to rise after a statement on Friday allayed fears about the telecom firm's exposure to government spending cuts. The group, which is one of Whitehall's largest suppliers of IT network services, has signed an agreement that means all of its contracts remain in place.

Shares rose another 2% or 2.7p to 150.1p today.

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09.30

London's leading index fell 20.8 points to 5,683.1 in early trading, dragged down by mining stocks which suffered as a rebound in the dollar put oil and metal prices on the back foot.

Added to which, two of the sector's giants, Rio Tinto and BHP Billiton, scrapped a proposed $116bn iron-ore joint venture in western Australia were called off in the face of opposition from regulators in Australia, Europe and Asia.

Rio Tinto dropped 84.5p to 4,058.5p and BHP 39.5p to 2,160p. Platinum firm Lonmin lost 54p to 1,777p, while Xstrata fell 38.5p to 1,273p and Antofagasta dipped 37p to 1,270p.

'The miners in general look like they're succumbing to a bit of profit taking,' Richard Hunter, head of UK equities at Hargreaves Lansdown, said.

'The fall in the dollar recently has led to a rise in commodity prices, and that has been good for the miners so (with the dollar rebounding) there is a bit of weakness there.' Lloyds Banking Group topped the risers board with a gain of 1.8% or 1p to 71.2p, rallying after recent falls as Goldman Sachs increased its target price for the stock. Elsewhere in the sector, HSBC lifted 0.2p to 653p.

Some perceived defensive stocks also helped limit losses as investors stayed away from riskier assets, with drugmaker GlaxoSmithKline adding 7.5p to 1,295.5p and Smith & Nephew - Europe's largest manufacturer of replacement knees and hips - up 6p to 548.5p.

Retailers were weak as investors awaited the British government's Comprehensive Spending Review on Wednesday, which is expected to involve a swathe of cuts to the public sector.

'In terms of the UK picture we are slightly concerned ahead of the UK spending review and (about) exactly what the impact will be, especially for the retailers if there are cuts to the public sector as severe as people believe - given they are consumers as well,' Hargreaves's Hunter said.

Marks and Spencer was down 2.2p to 410.3p, Tesco was off 3.4p to 431.6p and Home Retail, the owner of Argos which reports results on Wednesday, was down 2p to 219.2p.

Elsewhere, brewer SABMiller fell 12.5p to 2,047p after it reported a first-half performance in line with group expectations.

In corporate news, Vertu Motors rose 4% after it posted a rise in first-half profits and said it was trading ahead of expectations after a strong new car performance in the key trading month of September. Shares were 1.2p higher at 29.2p.

BlueBay shares surged more than 30% after the specialist credit asset manager agreed to a £963m takeover by Royal Bank of Canada, with the stock trading a few pence above RBC's offer price.

RBC is offering 485p per share to buy BlueBay, and BlueBay shares are up to 488.5p.

'In our view, with significant staff ownership, board approval, 20.5% irrevocables and a decent premium this looks a 'done deal,'' Numis Securities writes in a research note.

The broker says the deal values BlueBay at 18 times its expected 2011 earnings.

Numis adds that other companies might now face takeover speculation, such as Aberdeen Asset Management, Tullett Prebon and moneysupermarket.com.

Stateside on the economic front, September US industrial production figures are due at 1315 GMT, while investors were waiting for corporate results from companies including Citigroup, due at 1200 GMT, and Apple, set to report after Wall Street's close.