FTSE rises on US consumer data

Britain's blue chip index rose on Tuesday, building on two straight sessions of gains as strong consumer confidence data from the United States offset renewed concerns about the eurozone debt crisis. London's added 24.24 points, or 0.5 percent, to close at 5,337 after turning higher in the afternoon, when data showed US consumer confidence rose much more than expected in November.
The reading, which came on the heels of encouraging sales data for the Thanksgiving period, boosted stocks with high exposure to the US, such as Wolseley, the world's biggest building supplies maker, which climbed 2.1 percent. "It just goes to show that the consumer in the US is still very strong and that has a positive effect on UK equities as well," said Angus Campbell, head of sales at Capital Spreads. "We're in a seasonably bullish time of the year for the market so people are looking to do some window dressing. Whether this rally can be sustained, it's questionable."
On the other hand, stocks exposed to UK consumer spending fell after the British government cut its economic growth forecasts and suggested tough austerity measures would extend beyond the next election due in 2015. Home improvements retailer Kingfisher, fell 1.2 percent, with consumer goods maker Reckitt Benckiser down 0.3 percent.
In a further sign that market sentiment is far from solid, traditional cyclicals such as banks and miners also retreated, with investors quick to take profit on recent gains. Lenders were the heaviest weight on the FTSE 100 after Moody's ratings agency warned it could downgrade the subordinated debt of 87 banks across 15 countries on concerns that governments would be too cash-strapped to bail them out.
State-backed Lloyds Banking Group was bottom of the blue chip table as it fell 2.1 percent, with Royal Bank of Scotland, which is also partly government-owned, dropping 1.1 percent. Adding to sovereign debt concerns for banks, Italy's borrowing costs hit a euro lifetime high of nearly 8 percent at an auction on Tuesday, piling pressure on eurozone finance ministers meeting in Brussels to discuss the region's crisis.
Analysts renewed their calls for the European Central Bank to intervene with a large-scale liquidity programme designed to ease pressure on distressed countries and avoid a credit crunch. The move has so far been opposed by Europe's paymaster, Germany, which is wary of inflation and reluctant to finance foreign government debt.
"We expect the Bundesbank to back full-scale ECB intervention at the very end, once all other options have failed," Berenberg said in a note. "We see a 90 percent probability that they will save the euro. The genuine 10 percent tail risk may be that, as the edge of the abyss gets closer, the ECB may wait so long ... that it may be too late." Berenberg's views were mirrored by Credit Suisse, which called for the ECB to bring interest rates to zero and purchase 1 trillion euros worth of eurozone sovereign bonds to avoid a "game over".