FTSE close: Rio Tinto up; EU debt news

By Ed Monk for Thisismoney.co.uk
Updated: 12:17 EDT, 2 December 2010

17.00 (close)

Market watcher: Will shares recover ground lost this week?

The London market continued its rally today after the European Central Bank stepped up efforts to contain the continent's government debt crisis.

While ECB president Jean-Claude Trichet failed to an announce an increase in the pace at which the central bank buys government bonds, markets were lifted by news it would prolong measures to provide ready cash to banks and steady the financial system.

The FTSE 100 Index surged 2%, standing 125 points higher at 5767.6, when Mr Trichet said the bank would delay the exit from its emergency liquidity measures and would continue to offer unlimited loans to banks through the first quarter of next year.

Traders were encouraged by reports that British banks were financially supported by the US Federal Reserve during the financial crisis, with Barclays being among the biggest beneficiaries. The revelation of the scale of borrowing reinforced the role of the Fed as a last resort lender in the banking world.

The pound fell against the euro to 1.17, as the single currency fought back from losses sparked by the ECB's silence over its bond-buying plans. Sterling was also down against the dollar, which had been lifted by strong retail and homes data.

Banking and mining stocks led the advance, with part-nationalised banks Lloyds and Royal Bank of Scotland up 2.5p at 66.5p and 1.6p at 41.6p respectively.

In corporate news, Thomson Holidays owner TUI Travel advanced more than 7% after its full-year results revealed an 11% increase in full-year operating profits.

The travel firm made an underlying operating profit of £447m in the year to September 30, up from £401m the previous year. Shares were up 15.6p at 230p.

B&Q owner Kingfisher was not far behind with shares lifting 17.1p to 254.9p after it said growth in international sales had offset a decline in the UK.

Rolls-Royce shrugged off earlier losses, after Australian airline Qantas said it had launched preliminary legal action against the company, following the recent failure of its Trent-900 engine, which was powering a Qantas A380 superjumbo. The incident resulted in a lengthy grounding of the airline's fleet of six A380s while a safety review was conducted.

The airline said it had filed a statement of claim in a federal court that will allow it to launch legal action against Rolls-Royce if required. Shares were up 7.5p at 626p.

Outside the top flight, JJB Sports closed 1p lower at 4.7p, but did plunge 30% at one stage, after it revealed it expected to breach certain financial covenants on a £25m Bank of Scotland loan after a deterioration in trading.

The sportswear retailer said sales continued to be below expectations and warned heavy snowfall and freezing temperatures sweeping the country could further hurt performance.

The biggest Footsie risers were GKN up 15p at 210.4p, TUI Travel ahead 15.6p at 230p, Kingfisher up 17.1p at 254.9p and Sage ahead 18p at 289p.

The biggest Footsie fallers were Inmarsat down 5.5p at 644.5p, Resolution off 1.1p at 213.8p, Imperial Tobacco down 7p at 1874p and Morrison off 0.6p at 271.9p.

15.00: On Wall Street, the Dow Jones has risen in early trading.

London shares loved that, and have resumed their upward trajectory. The FTSE 100 is 72 points higher at 5714.5.

14.25:

The FTSE 100 is holding onto gains, and sits 31.33 points higher at 5673.83.

The ECB today rejected calls to increase asset purchases from eurozone banks (see the 10am update), preferring to maintain liquidity measures at the same level.

Despite the inaction, the fortunes of the indebted eurozone economies seems to have improved as the day has gone on.

Yields on government bonds from Spain, Ireland, Belgium and Italy were level or lower, while Greece's was slightly higher. (Lower yield means the markets are demanding less return on the money they lend, indicating they are less concerned about the nation's ability to repay).

The big winner was Portugal, thought to be next on the list of failed EU nations. The yield Portuguese government debt fell from 6.52% to 6.23%.

12.35: A lunchtime update - the FTSE 100 is 44.3 points higher at 5686.82.

The Footsie has now made up the lost ground from Monday and Tuesday and is now in positive territory for the week.

Among the companies reporting today, Marston's has reported that it's 'F-Plan' - to focus on 'food, families, females and forty/fifty-somethings' - has paid off with a 4.6% rise in profits to £73.5m.

Marston's shares are 6p - or 5.9% - up at 4106.6p. Read more.

Shares in Tui Travel flew up 13.9p (6.5%) to 228.3 on signs of a positive outlook for 2011. The holiday firm said bookings for activity holidays in particular are strong for next year. Read our report.

11.30

The Footsie has given back some of its earlier gains and is now trading 26.60 points higher at 5,669.10.

A warning by JJB Sports that it is likely to break its loan terms in January due to struggling sales sent its share price tumbling by 19%. The stock is trading 1.08p down at 4.7p.

10.00:

The key economy news today comes from the European Central Bank.

The ECB must decide whether to offer more stimulus to eurozone banks. A further asset purchase scheme has been called for.

The yield on government bonds from the most debt-ridden eurozone economies has eased today - Spain, Portugal, Greece, Belgium, Italy Ireland all saw the markets demanding less return for loans.

In equities, the FTSE 100 is carrying on where it left off yesterday and is now 50.7 points better off at 5693.20.

We have news about Kingfisher, where flagging B&Q sales were offset by overseas earnings growth in the latest quarter. The shares are trading up 1.2p at 239p.

09.30:

The FTSE 100 moved higher today with commodity stocks continuing their rally and banks higher ahead of an update on eurozone debt.

The London market moved cautiously today as traders awaited an update from the European Central Bank on the escalating debt crisis on the continent.

The FTSE 100 Index edged 13 points higher to 5656.1, after a strong session on Asian markets - driven by improved economic indicators in the US and China.

They helped commodity-related stocks in early trading. Rio Tinto headed the risers - 19p higher at 4,326p - with BG Group, 25.5p up at 1,216p, and BP, 8.5p up at 438.35p, also gaining.

The ECB is expected to soothe mounting concerns in Europe by stepping up its Government bond-buying programme after its latest rate-setting meeting.

The positive sentiment lifted banking stocks, with part-nationalised banks Lloyds and Royal Bank of Scotland up 0.6p at 64.6p and 0.3p at 40p respectively.

In corporate news, Thomson Holidays owner TUI Travel advanced nearly 3% to the top of the risers board after its full-year results revealed an 11% increase in full-year operating profits.

The travel firm made an underlying operating profit of £447m in the year to September 30, up from £401m the previous year. Shares were up 6.9p at 221.3p.

Rolls-Royce dropped more than 1% after Australian airline Qantas said it had launched preliminary legal action against the company, after the recent failure of its Trent-900 engine, which was powering a Qantas A380 superjumbo. The incident resulted in a lengthy grounding of the airline's fleet of six A380s while a safety review was conducted.

The airline said it had filed a statement of claim in a federal court that will allow it to launch legal action against Rolls-Royce if required. Shares were down 7p at 611.5p.