FTSE breaks its losing streak as US jobless data provides some cheer

BRITAIN’S top shares snapped a three session losing streak yesterday, led higher by gains in commodity and financial stocks as a fall in US jobless claims fuelled recovery hopes.

The weekly claims figure was the lowest for four years and complemented last week’s fall in US unemployment, providing another piece of evidence that the economy may be in better shape.

The FTSE 100 index closed up 53.04 points, or 0.9 per cent, at 5,829.75, recovering after reaching its lowest level since 1 October during morning trading.

“FTSE back at the important 5,800 level after bouncing off support. If we can hold this level then we might just be about to hear people discussing a year-end rally,” said Lex van Dam, a partner at hedge fund Hampstead Capital, which manages around £315m.
Gains by mining stocks provided the biggest lift for the blue chips, up 1.7 per cent, supported by a firmer copper price as the US data relieved worries over global growth prospects. Hopes that top metals consumer China could launch fresh stimulus measures offered additional help.

Banks were also in demand, up 1.9 per cent.

RBS was a strong performer, ahead 4.2 per cent as shares in its spun-off insurance business Direct Line closed at 188p on their stock market debut, a premium of around seven per cent to their offer price.

Strong demand from private investors helped RBS raise £787m via the sale of 30 per cent of Direct Line at 175p each, near the middle of their indicated price range.

Stuart Welch, chief executive of stockbroker TD Direct Investing, said: “TD clients have made Direct Line Group their second most popular buy and top sell ... indicating that some clients have opted to take a quick return on their investment.”

Burberry was the top gainer, up 13.3 per cent as the luxury fashion group posted signs of slightly better trading in September after a profit warning last month.

“This is the first opportunity since the profit warning to look closely into the numbers and see if a turnaround by management can allow upgrades to EPS (earnings per share) ... we see any weakness as a buying opportunity,” said Atif Latif, director sales and trading at Guardian Stockbrokers.

Trading volume in Burberry was very strong at 541 per cent of the 90-day daily average, by far the most actively traded blue chip, with FTSE 100 volume at 91 per cent of the daily average.

Conversely, WM Morrison was the biggest blue chip faller, down 1.6 per cent after two broker downgrades impacted Britain’s fourth-biggest food retailer, according to traders.

Volume in Morrison was 200 per cent of the daily average.

Investors’ increased willingness to take on risk meant most blue chip fallers were also defensive stocks, seen as less exposed to the vagaries of the economic cycle, with drugmakers, brewers, and utilities coming off worst.

“The rally does come with a word of warning as volumes were woefully thin, so we would have to see this move to the upside go further to be confident that all the sellers have been shaken out,” said Angus Campbell, head of market analysis at Capital Spreads.