FTSE in modest rise as investors eye Fed

The FTSE 100 saw a modest rally this morning led by banking and commodity stocks as investors looked for signs that the Federal Reserve will inject more liquidity into markets.

London’s blue chip index was dented yesterday by uncertainty over who will be the next president of France, the collapse of the Dutch government and a string of negative economic data.

In the Netherlands the coalition government was brought down by the controversy surrounding austerity measures in the country.

But the Federal Reserve starts a two-day meeting today which is setting the tone for markets.

Meanwhile the UK's public sector budget deficit was higher than expected in March, but downward revisions in previous months enabled the government to meet its full-year target, the Office for National Statistics said.

It rose last month to £18.1bn from £17.9bn in March 2011.

Hedge fund giant Man Group was the biggest climber on the FTSE 100 in early trading today, up 3.8 per cent.

Barclays led the banking sector with a two per cent lift. Lloyds was up 1.2 per cent and RBS 0.2 per cent.

Engineer IMI was up 1.8 per cent as it continued to progress after an upbeat trading statement last week.

Insurers Prudential and Aviva and were both up a shade over two per cent.

Royal Dutch Shell added 0.5 per cent after it announced that it has agreed to buy Mozambique-focused explorer Cove Energy for £1.12bn in cash, raising its earlier offer. AIM-listed Cove nudged up by 3.9 per cent.

Meanwhile AB Foods put on 1.7 per cent after reporting strong sales for its Primark business as well as in sugar.

Heavyweight miners, including Rio Tinto and BHP Billiton, saw their prices shored up after a tough day’s trading yesterday.

Among companies whose stocks were sliding was outsourcer group Capita which lost 5.4 per cent. The company’s first quarter trading statement, showing a strong order book and rise in turnover, failed to impress investors. Espirito Santo reinforced its sell rating on the company saying that it was becoming too heavily reliant on acquisitions.

Rival Serco saw one per cent clipped off as the sector struggled.

iPhone chip maker Arm Holdings was the second biggest faller, down two per cent, despite announcing that first quarter profit had risen by 22 per cent.

In Asia the Nikkei closed down 0.7 per cent and the Hang Seng up 0.2 per cent.

Meanwhile across the Atlantic Facebook said its net income slid 12 per cent to $205m (£127m) in its first quarter, from $233m a year earlier. The fall comes ahead of the company’s much heralded IPO.