FTSE breaches the 6,300 mark but loses steam

BRITAIN’S top share index breached the 6,300 level for the first time since May 2008 yesterday, driven by strength in banking and energy stocks, although that heady height failed to hold for the close.

Global giant HSBC added the most points to the FTSE 100 index, with its 1.0 per cent advance alone, accounting for almost 5 index points and helping the UK banking sector to a 0.8 per cent gain.

Goldman Sachs reiterated its “conviction buy” rating on HSBC on the basis of relative valuation, return trends and expectations.

The bank also repeated its “buy” rating on Barclays, the top percentage blue chip gainer, up 1.7 per cent.

But Goldman downgraded its rating for Royal Bank of Scotland to “sell” as it believes the majority-state-owned lender is the most exposed to near-term regulatory risk.

RBS shares still gained 0.5 per cent with the banking sector overall buoyed by Friday’s news that banks will repay early €137bn of crisis loans taken a year ago from the European Central Bank, and which ECB President Mario Draghi has said “avoided a major, major credit crunch”.

The bigger-than-expected repayment was seen as a sign that at least parts of the financial system are returning to health.

Other financial stocks also took heart from the move, with Aberdeen Asset Management rallying 1.6 per cent, and insurer Standard Life up 1.2 per cent.

The FTSE 100 index closed up 9.96 points, or 0.2 per cent at 6,294.41, having reached a fresh four and three quarter year peak of 6,311.26.

“The benchmark has now seen off four major figure levels in under a month and is now 6.7 per cent higher than where it started the year which has caught even some of the more bullish investors by surprise,” Angus Campbell, Head of Market Analysis, Capital Spreads said.

“Since we’ve seen such considerable strength in equity markets so far this year there's bound to be some resistance near the highs, but with the 6,300 level now behind us for those bullish investors the only way is up,” Campbell added.

Market heavyweight Vodafone was also a big contributor to the FTSE 100 advance again, up 0.5 per cent and adding more than 1.6 points to the index as the telecoms firm extended its advance into a third consecutive session. Traders have cited talk that the mobile telecoms group may sell its stake in its US wireless joint venture to partner Verizon as the main reason behind the rally.

Energy stocks also added their considerable strength to the blue chips, providing over three points of the index’s advance, ahead of the sector’s upcoming earnings season.