FTSE close: Banks, BP bounce; M&S, Dixons steady

By Reuters
Updated: 12:19 EDT, 1 April 2011

17.10 (close)

The FTSE 100 Index today rallied past the 6,000 mark for the first time in nearly a month after a report revealed the US unemployment rate fell to a two-year low in March.

The London market closed 101.2 points higher at 6009.92, after the US Labor Department said the unemployment rate fell to 8.8% as companies added workers at the fastest month-on-month pace since the recession.

Wall Street's Dow Jones Industrial Average surged in early trading, up 0.8% as the figures lifted confidence in the global recovery. Elsewhere, the DAX in Germany was ahead 2% and France's Cac-40 was up 1.6%.

PMI manufacturing data highlighted inflationary pressures in the UK, adding weight to the argument for an interest rate hike. This lifted the pound, which was up against the US dollar at 1.61 and the euro at 1.13.

The banking sector surged ahead as traders shrugged off the implications of the Irish bank stress test results.

The Central Bank in Dublin yesterday confirmed the final bill for bailing out the beleaguered country's banks would be an eye-watering 70 billion euros (£61bn).

The figure initially sparked declines across the banking sector, but analysts said traders soon realised there was "little to fear".

Part-nationalised Lloyds Banking Group led the sector, up 2.9p at 61p, while fellow taxpayer-backed bank Royal Bank of Scotland stood 1.6p higher at 42.3p. Both banks are seen as being heavily exposed to the Irish economy.

Barclays was ahead more than 4%, up 11.9p at 289.5p, while HSBC advanced 14.1p to 655.1p.

Oil giant BP enjoyed a rare appearance on the risers' board after a poor run sparked by its deteriorating share swap and exploration deal with Russian government-owned Rosneft.

A bullish broker note from JP Morgan Casenove helped shares in the embattled firm advance nearly 4%, or 16p to 470p.

Retail giant Marks & Spencer was also in the spotlight after new boss Marc Bolland announced the chain's return to France a decade after it pulled out of the country.

The retailer is to launch a website in France and open a three-storey outlet on the Champs Elysees in Paris towards the end of 2011. M&S shares moved ahead following the announcement, up 2.2p to 338.9p.

Elsewhere in the retail sector, stocks hit hard by recent gloom pulled out of their tailspin.

Dixons Retail steadied after two days of heavy declines sparked by this week's profits warning, with shares up 0.1p to 12.7p.

Elsewhere, Primark-owner Associated British Foods was up 11p at 1003p, B&Q parent Kingfisher was ahead 7.9p at 253.8p and Next added 20p at 2000p.

The biggest Footsie risers were Wood Group up 32.5p at 670p, Lloyds Banking Group ahead 2.9p at 61p, Randgold Resources up 232p at 5200p and Barclays ahead 11.9p at 289.5p.

The biggest Footsie fallers were 3i Group down 13.1p at 285.8p, Serco Group off 10p at 548p, Intercontinental Hotels down 14p at 1264p and International Power off 2.8p at 305.2p.

14.50: The Dow Jones has climbed 34.3 points to 12,354.

The FTSE 100 has made further progress and is up 79.3 points at 5,987.9.

14.00:

Futures trading indicates a strong opening on Wall Street after keenly-watched monthly jobs data surpassed expectations.

Jobs growth was 216,000 in March, compared with an upwardly revised 194,000 last month. The unemployment rate dropped to 8.8%, from 8.9%.

The FTSE 100 has extended gains and is trading up 68 points at 5,976.8.

13.00:

Oil giant BP is enjoying a rare appearance on the risers' board after a poor run sparked by its deteriorating share swap and exploration deal with Russian government-owned Rosneft.

A bullish broker note from JP Morgan Casenove has helped shares in the embattled firm to advance more than 2%, or 9.8p to 463.9p.

The non-farm payrolls data from the US is predicted to show solid growth in job creation of 185,000 in March, while private payrolls are expected to rise by 203,000.

The US unemployment rate is forecast to stick at 8.9%.

The FTSE 100 is up 57 points at 5,965.8.

11.40:

The FTSE 100 is ahead 46.6 points at 5,955.3 as investors await key jobs data from the US later.

Futures trading points to a mildly positive open for US markets.

Back in the UK, shares in magazine publisher Future have plunged 11% or 3p to 23.5p after it announced a £2m hit to profits in the past half year.

The group, which publishes titles such as Total Film and technology magazine T3, said sales fell by between 2% and 3% in the six months to March 31 as conditions remained challenging. We have more here.

9.50:

Blue chip banks bounced back from yesterday's late-session slide as investors shrugged off the Irish bank stress test results.

'The additional financing is coming from the already agreed draw-downs, so the sell-off at the close last night was a knee-jerk reaction given the timing of the announcement,' Martin Dobson, head of trading at Westhouse Securities, said.

Barclays led the rebound following steep falls on Thursday after the stress tests revealed the final bill for bailing out Ireland's banks would be an eye-watering €70bn (£61bn).

Support from Asian markets overnight helped buoy sentiment, with the wider FTSE 100 index up 46 points to 5,955. Despite gaining more than 6% in the past two weeks from its March low of 5,591.59, the Footsie is flat on the year, and traders said continuing uncertainty will limit extravagant moves on the upside.

'The market's in a very tentative state with the potential for further problems in Europe, and the volatility could well come back into the market,' Westhouse's Dobson said. 'There is potential for decent earnings from companies coming out in the second-quarter but I think we're in a state of flux.'

Barclays rose 3%, up 9.8p to 287.4p, followed by part-nationalised players Royal Bank of Scotland and Lloyds Banking Group - seen as being heavily exposed to the Irish economy - up 1.2p to 42p and 1.1p to 59.2p respectively.

Insurers joined the rally among financials. Old Mutual was up 1.8p (1.3%) to 137.8p. It announced Maryland Insurance Administration has approved takeover of its U.S. Financial Life Insurance company by Harbinger Group Inc.

Miners were in the ascendency, buoyed by Chinese trade data, which showed the country's manufacturing sector grew for a 25th straight month, while factory inflation eased. The figures cooled fears the country's fiscal tightening measures would impact growth and demand sufficiently from the world's largest consumer of natural resources.

Randgold Resources added a further 92p (1.8%) to 5,060p to the previous session's gains when it reported an upbeat update.

BP rose 10.8p (2.4%) to 464.8p, among the strongest performers after JPMorgan put the oil major on its EMEA analyst focus list and said it is 'seriously undervalued' and has a 26% upside.

On the downside, private equity group 3i Group fell 11.6p (3.9%) 287.3p after it said a weak performance in the UK had offset strong growth in Northern Europe.

Perceived defensive stocks also weighed on the downside with International Power slipping 0.7p (0.2%) and Smith & Nephew down 0.5p (0.1%). These are Europe's largest artificial knees and hips makers.

Drugmaker GlaxoSmithKline underperformed the market, up just 3p (0.2%) to 1,192.5p despite UBS citing it as its key pick in as it upgraded the European pharmaceuticals sector to overweight.

Shares in Max Petroleum jump 1.5p (9.2%) to 17.5p after the explorer says it has found high quality oil at a well it has been drilling in Kazakhstan and expects to start drilling an ultra deepwater well, known as a pre-salt well, in August this year.

The well has a mean resource potential of 467m barrels of oil equivalent, with a 29% chance of success.

'Max has several similar prospects in the portfolio and we view the chance of success of those prospects as very good. The firming-up of plans for the drilling is also excellent news and should have a positive impact on the stock today,' Fox-Davies Capital says in a note to clients. The brokerage currently has a 'buy' rating on the stock.

Retail giant Marks & Spencer was also in the spotlight as new boss Marc Bolland announced the chain's return to France a decade after it pulled out the country. The retailer is to launch a website in France and open a three-storey outlet on the Champs Elysees in Paris towards the end of 2011, with aims to open Simply Food stores and a 'handful' of larger food and clothes stores. M&S shares gained little momentum, edging up 0.2p to 336.9p, as the market digested the news.

Elsewhere in the retail sector, stocks hit hard by recent gloomy news pulled out of their tailspin.

Dixons Retail steadied after two days of heavy declines sparked by this week's profit warning, with shares up 0.1p to 12.7p.

Sterling steadied against the euro and the dollar, but looked vulnerable to further weakness from a hawkish outlook for euro zone interest rates and talk of tighter monetary policy from the US Federal Reserve.

The pound hit its lowest in five months on Thursday against the euro at 88.5p after higher than forecast inflation in the euro zone cemented expectations for a rise in European Central Bank interest rates as early as next week.

The euro gave back some ground to trade down 0.2% at 88.1 in quiet trade as markets steadied ahead of the latest US employment report at 1230GMT.

'What we have now is more hawkishness coming out from ECB, more hawkishness coming out from some members of the FOMC, so there's nothing quite so special about the UK's rate outlook, and that's being reflected and eroding the interest rate outlook for sterling,' said Kit Juckes, currency strategist at Societe Generale.