FTSE 100 peaks at 21-month high led by banks and energy

BRITAIN’S top share index rose 0.5 per cent yesterday, hitting a fresh 21-month closing high, led by commodity, enErgy and banking stocks as fears over monetary tightening effects ebbed.

The FTSE 100 index ended 29.09 points higher at 5,673.63, after hitting an intra-day high of 5,695.94. It was the highest close since June 19 2008.

Miners added the most points to the index as metal prices rebounded, having been hit by worries that monetary tightening in China and India could weigh on global demand.

“Investors have shrugged aside the monetary tightening concerns for now, buying back in on the previous session's dips, while the bullish corporate data has also given the market a lift,” said Jimmy Yates, head of equities at CMC Markets.

Eurasian Natural Resources, Lonmin, Rio Tinto and Vedanta Resources gained 2.4 to 3.8 per cent.

Cairn Energy was the top FTSE 100 gainer, up 8 per cent to a year high after the oil explorer accompanied full-year results with upbeat comments on its operations in India and Greenland, prompting BofA Merrill Lynch to hike its net asset value.

Other energy stocks rallied as crude prices rose to around $82 a barrel. BP and Royal Dutch Shell firmed 0.8 and 0.5 per cent respectively.

Banks bounced back from Monday's losses, when fears resurfaced over Greece’s and Dubai’s debt. Barclays, Standard Chartered, Royal Bank of Scotland and Lloyds Banking Group were up 0.6 to 3.1 per cent.

Debt-laden Dubai World will present plans to restructure its $26bn debt pile to creditors this week, sources familiar with the talks said.

Life insurer Legal and General was up 4.7 per cent after it posted profits ahead of analysts’ expectations.

As the appetite for risk spread among investors, perceived defensive stocks were the main drag on the FTSE 100. Imperial Tobacco, the world’s fourth-biggest cigarette maker, shed 0.4 per cent after it said its half-year cigarette volumes will be down around four per cent. British American Tobacco fell 0.5 per cent.

Drugmakers GlaxoSmithKline and Shire fell 0.7 and 0.2 per cent respectively, while consumer goods giant Unilever shed 1.6 per cent and drinks maker SAB Miller fell 0.5 per cent.

Home improvement retailers fell sharply. Home Retail and Kingfisher were off 2.5 and 2.6 per cent respectively, with traders citing the profit warning issued by mid-cap floor coverings retailer Carpetright as a catalyst.

Kingfisher reports full-year results on Thursday.

BAE Systems was another big faller, losing 2.2 per cent after broker Bernstein downgraded the defence stock, the day after US firm General Dynamics beat BAE to a UK tank building contract.

British retail sales growth slowed more than expected in March, according to industry figures, while annual consumer price inflation slowed last month for the first time since September.