Thursday, 29 November 2012 14:54
LONDON: Britain's top share index pushed higher on Thursday, led by risk-sensitive miners and banking stocks, reflecting a swing in sentiment over negotiations for a US budget deal.
Wall Street posted strong gains and Asian equities advanced overnight after US House of Representatives Speaker John Boehner voiced optimism that Republicans could broker a deal with the White House to avoid a new year 'fiscal cliff' of austerity measures that could stall the world's largest economy.
President Barack Obama added to the positive mood, saying he hoped to get a deal done in the next four weeks.
At 0919 GMT, the FTSE 100 index was up 44.68 points, or 0.8 percent at 5,847.96, having gained 0.1 percent on Wednesday after a volatile session, as sentiment on the US fiscal negotiations waxed and waned.
"One minute the portents for a deal on the fiscal cliff are negative, the next minute they are positive. This is likely to be the pattern all the way up to the deadline on Jan. 1, so equities are sure to remain volatile and trading subdued until there is any concrete outcome to these negotiations," said Mike Mason, a senior trader at Sucden Financial Private Clients.
Gains by mining stocks accounted for over 13 points of the blue chips' advance, with the sector supported by a rising copper price on hopes that a resolution to the cliff will boost the global economy and demand for commodities.
Rio Tinto was the top FTSE 100 gainer, up 4.1 percent in volume of over 40 percent of its 90-day daily average, compared with 13 percent for the FTSE 100 overall. The global miner is aiming to axe $7 billion in costs over the next two years as it faces weaker commodity prices.
"These are ambitious targets and very meaningful for a company delivering circa $19 billion in EBITDA in both 2013 and 2014 on our numbers," Liberum Capital analyst Richard Knights said in a note.
"Running these cost savings verbatim through our model suggests circa 20 percent upside to EPS (estimates for Rio Tinto) at first glance," Knights added.
Among the firmer banks, Standard Chartered was the best performer, up 1.7 percent. Traders cited the influence of a Wall Street Journal online report saying the firm is nearing a settlement with the United States to pay around $300 million in fines over transactions with Iranian clients that may have violated sanctions against the country.
"Given the short term uncertainty regarding the potential outcome for the dealings with Iran, we expect to see the news not only well received by the market but also bringing in fresh buying given Standard Chartered's geographical presence and ability to outperform European banks," director of dealing at Guardian Stockbrokers Atif Latif said.
There were only a handful of blue chip fallers as some investor confidence returned.
John Wood Group was the biggest loser, down 4 percent after Credit Suisse said it had placed 16.4 million shares in the oil services firm on behalf of the Wood Family Trust and others, representing around 4.4 percent of its issued share capital, at a price of 775 pence a share each.
Volume in Wood Group was almost three-quarters of its 90-day daily average.
Among just five other blue chip fallers, Europe's No. 1 home improvements retailer, Kingfisher lost 1.3 percent after posting a 6 percent fall in third-quarter profit, hit by a fall in sales in its main markets in France and the UK as well as unfavourable foreign exchange movements.
Copyright Reuters, 2012