FTSE 100 close: Stress test boost for shares
Lower-than-feared losses at Royal Bank of Scotland helped the group surge 14% ahead today and lead a second charge in the FTSE 100 index rally.
American splendour: There was good news Stateside
Investors took heart from the bank's strong investment banking results and losses that were not as bad as some had expected, despite news of £2.9bn in bad debts.
The wider Footsie also rebounded after yesterday's profit taking, up another 50.0 points to 4,448.7 by mid-afternoon.
RBS held firm at the top of the league of risers, with shares ahead 5.8p at 47.4p.
The better sentiment helped Lloyds Banking Group edge higher as well, clawing back some of the fall seen yesterday after its trading update revealed hefty bad debts. Shares rose 3.7p to 100.7p.
It was a brighter session for banks in general as global markets also rose after the results of US bank stress tests were well-received, although US jobs data due later today could dampen the mood. Ten US banks have been told to raise more capital, but the result is better than many had feared.
HSBC rose 22.5p to 577.5p ahead of a trading update due on Monday and Barclays gained 5.25p to 281p.
Among top-flight fallers, media group Thomson Reuters shed 75p to 1737p after RBS brokers slapped a sell rating on the firm.
Travel company Thomas Cook went the same way, down 15p to 276.5p, despite more positive comments on the firm from Citigroup.
Insurers also gave back some of their recent gains, with Legal & General down the most with a fall of 2.9p to 69p. Standard Life followed, off 3.7p at 193.1p.
Private equity firm 3i was also higher after it launched a £732m rescue rights issue, which sent shares up 14% or 48.75p to 387.75p. The group plunged nearly £2bn into the red last year and has seen the value of its portfolio slump by more than £2.3bn in the year to March.
CEO Michael Queen said the fully underwritten rights issue will 'strengthen not only our balance sheet but also our market position', and looking forward he added 'while the operating environment remains very challenging, I have great confidence in 3i's intrinsic strengths'.
The new shares will be priced at 135p, a 60% discount to Thursday's close and a 40% discount to the theoretical ex-rights price.
Richard Curr, Head of Dealing at Blue Index, commented, 'The precipitous fall in the 3i share price is well documented, and there is no doubt that the cash position and funding crisis has been weighing on the stock.
'Today's fully underwritten rights issue removes any uncertainties over funding, and to echo CEO Michael Queen's comments, "3i as a business has great intrinsic strengths". Blue index now expects to see further progress from the shares, and we are buyers with a short term target price of 375p.'
Oil stocks added the most points to the index, gaining ground as crude prices rose to almost $58 per barrel. BP added 11% to 521p, Royal Dutch Shell 47p to 1,620p and BG Group 14p to 1,218p.
In the FTSE 250, Carphone Warehouse rose 6% or 9.5p to 167.5p after the company paid £236m for the UK business of Tiscali - a move which will make it the country's biggest residential broadband supplier.
Housebuilder Taylor Wimpey's shares were down almost 23%, or 11.25p to 37p, after it announced plans for a rights issue to raise £510m. It wants the cash to bolster its balance sheet and fund investment opportunities.
On Aim, Metals Exploration fell 0.5p to 13p after it announced a share placing of £12m at 11.5p. Major shareholder Solomon Capital has subscribed for £8m, which would increase its interest in the Philippines miner from 29.9% to 44.1%.
Minng sector information provider Minesite.com says CEO Jonathan Beardsworth is delighted with the deal, calling it 'stunning'.
'Now that there's money in the bank, it's almost as if the global economic crisis will work to Metals Ex's advantage. Combining [the CEO's] confidence with a recovering stock market clearly creates a strong proposition to attract new investors.'
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