LONDON (ShareCast) - - Stocks jump after ESM vote in Germany
- Spain considering ECB bond purchases
- Banks lead the rally

The FTSE 100 had swung into positive territory by Wednesday lunchtime with banking stocks in the lead after Germany's high court approved the Eurozone's new rescue fund, the European Stability Mechanism (ESM).

"The final decision on the legality of the ESM and Fiscal Pact won’t come until December, however today’s decision suggests that there’s very little chance the court will rule against it then. They did claim the ruling does come with conditions though," said analyst Craig Erlam from Alpari.

First, Germany's contribution must be limited to €190bn unless there is parliamentary approval; and second, both chambers of Congress - the Bundestag and Bundesrat - must be informed of the ESM's decisions. This decision was the last major challenge before the ESM can replace the temporary European Financial Stability Facility (EFSF).

Spanish Prime Minister Mariano Rajoy has completely ruled out a request for a full scale bailout but is thought to be keeping his options open for the European Central Bank (ECB) to purchase sovereign bonds, according to Finnish newspapers. However, market strategist Ishaq Siddiqi from ETX Capital said that "it is just a matter of time before Spain asks for EFSF/ESM support and hence ECB interventions and we look to the Ecofin meeting at the end of this week for further clarity on Spain’s position."

In domestic news, the number of people claiming jobless benefits in the UK fell by 15,000 in August, better than the consensus forecasts for a stable reading. The unemployment rate was 8.1% of the economically active population, down 0.1 percentage points on the quarter.

Asian stocks jumped overnight after China's Premier Wen Jiabao reassured that his country would hit its gross domestic product (GDP) growth target of 7.5% this year.

"It is true that the Chinese economy is under notable downward pressure, but with our efforts to shift our economic model, better allocate resources and implement more reform and opening up, we have the ability to keep the economy in good shape," he told the World Economic Forum. "We will give greater priority to stabilising growth and maintaining the continuity and stability of our policies," he said.

Analysts have highlighted several other “event-risks” over the next day or two, though the biggest event of all will undoubtedly be the upcoming Federal Open Market Committee (FOMC) two-day meeting in the US which kicks off today. Sluggish labour figures on Friday have increased hopes that the Fed may move to ease monetary policy further when the meeting concludes on Thursday.

FTSE 100: Banks jump after German vote

UK banking stocks advanced after the ESM was approved by Germany: Lloyds, Royal Bank of Scotland, Barclays, Standard Chartered and HSBC were making gains by midday. RBS was benefiting after Liberum Capital lifted its target price for the stock from 260p to 270p and reiterated its 'buy' rating.

Following fall early on, B&Q owner Kingfisher was trading higher by lunchtime despite reporting that first-half sales and adjusted pre-tax profits slipped 3.3% and 15.5%, respectively, as wet weather and adverse exchange rates put a dampener on its performance. Panmure Gordon maintained its 'buy' recommendation for the shares this morning, saying that the business remains "on track for the long term".

Insurance group Admiral and financial services firm Hargreaves Lansdown were heavy fallers this morning after going ex-dividend. Other FTSE 350 stocks going ex-div today include: 888, Antofagasta, bwin.party, Capita, Cookson, Ladbrokes and Rentokil.

Telecoms group Vodafone fell on reports that Verizon Wireless's special dividend may be delayed after people close to the matter said that the US mobile-phone joint venture will not discuss it at an upcoming meeting next week.

Sector peer BT Group was making gains after Credit Suisse raised its target price for the shares from 250p to 300p and maintained its 'outperform' rating.

FTSE 250: Barratt drops after first-half results

House-builder Barratt Developments was firmly in the red despite revealing a 159.3% rise in pre-tax profit in the year to June 30th. The group signalled its intention to pay a final dividend in respect of the current financial year, but there was no pay-out for the financial year just gone.

Oil and gas group Afren edged higher after saying that it has started drilling at its Simrit-3 well on the East Simrit prospect in the Kurdistan region of Iraq, just 10km east of the successful Simrit-2 well which was drilled a few months back.


FTSE 100 - Risers
Lloyds Banking Group (LLOY) 38.30p +3.32%
Royal Bank of Scotland Group (RBS) 273.20p +3.21%
Sage Group (SGE) 314.60p +2.88%
BT Group (BT.A) 232.80p +2.78%
Antofagasta (ANTO) 1,256.00p +2.45%
GKN (GKN) 228.50p +2.33%
Vedanta Resources (VED) 1,001.00p +2.30%
Petrofac Ltd. (PFC) 1,630.00p +2.07%
Weir Group (WEIR) 1,711.00p +1.91%
Evraz (EVR) 266.00p +1.88%

FTSE 100 - Fallers
Hargreaves Lansdown (HL.) 629.00p -3.82%
Admiral Group (ADM) 1,087.00p -2.86%
ICAP (IAP) 332.10p -1.80%
British American Tobacco (BATS) 3,138.50p -1.37%
Wolseley (WOS) 2,649.00p -1.34%
BG Group (BG.) 1,253.50p -1.34%
Babcock International Group (BAB) 910.00p -0.93%
Smiths Group (SMIN) 1,028.00p -0.87%
Meggitt (MGGT) 403.00p -0.86%
G4S (GFS) 253.40p -0.86%

FTSE 250 - Risers
Aquarius Platinum Ltd. (AQP) 40.76p +6.93%
Cape (CIU) 245.10p +3.37%
Home Retail Group (HOME) 100.60p +3.34%
Talvivaara Mining Company (TALV) 153.60p +3.02%
Henderson Group (HGG) 114.00p +2.61%
Brewin Dolphin Holdings (BRW) 157.00p +2.48%
AZ Electronic Materials SA (DI) (AZEM) 331.00p +2.45%
Stobart Group Ltd. (STOB) 118.00p +2.43%
Homeserve (HSV) 236.60p +2.25%
Electrocomponents (ECM) 235.50p +2.21%

FTSE 250 - Fallers
Barratt Developments (BDEV) 158.90p -6.36%
Dixons Retail (DXNS) 19.27p -3.65%
Lonmin (LMI) 589.50p -3.52%
Gem Diamonds Ltd. (DI) (GEMD) 172.00p -2.93%
International Public Partnerships Ltd. (INPP) 120.10p -2.52%
Ruspetro (RPO) 97.50p -2.50%
Berendsen (BRSN) 550.00p -2.48%
Grainger (GRI) 98.25p -1.75%
London & Stamford Property (LSP) 116.50p -1.69%
Bank of Georgia Holdings (BGEO) 1,288.00p -1.68%

BC

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