Happy Monday for financials as US data lift big cap shares

Britain's top share index closed 1.1 per cent higher yesterday, helped by upbeat US manufacturing data, with banks and commodity stocks topping the list of gainers.

The FTSE 100 closed up 58.89 points at 5,247.41, having dipped to 5,163.57 earlier in the session. The index ended 0.8 per cent higher on Friday.
Experts said the rise was also due to technical reasons.

“We’re reaching a point where this correction [from the January high] has given up almost as much as the last major correction in the FTSE which was June/July last year,” said Angus Campbell, head of sales at Capital Spreads.

“[It would] seem like not a bad time for bulls to come back into the market, particularly since the overall upward trend remains still intact.”

Banks added the most points to the index, extending Friday’s bounce back, with HSBC, Standard Chartered, Barclays and Lloyds Banking Group putting on 1.4 to 4.3 per cent.
Royal Bank of Scotland jumped 7.9 per cent.

RBS is making very strong efforts to try and sell some of its assets. If they get lucky with Sempra and some of their property portfolio, that would show a very strong initiative to strengthen the balance sheet,” said David Buik, partner at BGC Partners.

“RBS has got a very strong business plan,” he added.
UK shares were lifted by data showing the manufacturing sector in the US grew in January and at a faster rate than expected, according to The Institute for Supply Management. The report followed strong data from China, Australia and the eurozone.

Life insurers joined in the rally by financials. Legal & General, Aviva, Standard Life and Prudential rose 1.5 to 3.8 per cent.

Commodity issues rebounded after falls earlier in the session, thanks to a recovery in metals and crude.
Among the miners, Vedanta Resources, Kazakhmys, Fresnillo and Lonmin added 4.2 to 5.2 per cent. Oil majors
Royal Dutch Shell, BP and BG Group climbed 0.2 to 1.3 per cent.

Utilities were in demand after a newspaper reported that midcap Northumbrian Water could receive a £1.7bn takeover offer from the Ontario Teachers’ Pension Plan, which already holds 27 per cent.

In a trading update, Northumbrian did not comment on a possible OTPP bid but said it expected group revenue for 2009/10 to be in line with the previous financial year. A spokeswoman for OTPP declined to comment.
Its shares topped the FTSE 250 leader board, up 11.8 per cent, while blue-chip peers Severn Trent and United
Utilities gained 4 and 2.8 per cent, respectively.

Airlines were also firmer. British Airways added 3.3 per cent after a report said its planned alliance with American Airlines and Iberia had moved closer to securing regulatory approval after the European Commission confirmed it had begun consulting with rival airlines.

The sector was further boosted by a bullish Goldman Sachs note and as Irish airline Ryanair increased its full-year profit forecast and posted a narrower-than-expected third-quarter loss. Ryanair and midcap low-cost peer easyJet added 6.7 and 2.1 per cent. Fund manager Schroders was the top faller, down 2.8 per cent.

Correction: Yesterday we mistakenly printed an old edition of our regular Martin on the Markets column by Martin Slaney. Sorry ­– the column returns as normal next Monday.