BANKING stocks led Britain’s top shares higher yesterday on strong corporate earnings and optimism over a deal in Washington to increase the US debt ceiling and avoid default.
The UK benchmark index closed up 63.83 points, or 1.1 per cent, at 5,853.82, building on the previous session’s 0.7 per cent advance.
Solid US earnings, including from Apple, have helped ease market tensions over sovereign debt issues in Europe and the United States which have triggered a five per cent drop on the FTSE 100 index since 7 July.
Chip designer ARM Holdings rose to near the top of the blue-chip leader board, up 4.9 per cent, as blockbuster sales of Apple’s iPhone provided reassurance that demand for smartphones remains strong.
Smaller tech firms like Wolfson Microelectronics and Imagination Technologies also posted big gains.
“I think investors have moved their minds on a little bit from some of the big macro concerns that remain in the backdrop and are starting to focus back on equity market fundamentals that are still very supportive indeed,” said Henk Potts, market strategist at Barclays Wealth.
“There is a potential in the short term for investors to be spooked by the macro issues, but investors should be really looking to take advantage of this weakness to be buying into equities.”
The banking sector index enjoyed its biggest one-day percentage gain in more than three months, as Barclays bounced 5.2 per cent to top the FTSE 100 leader board, while Lloyds Banking Group added 4.1 per cent.
Market jitters ahead of today’s emergency summit on Greece’s debt crisis were replaced by a feeling of cautious optimism. Confidence was also boosted by signs of progress on a US budget deal.
“There are a lot of people that think the [recent] sell-off was just overdone a little bit,” said Angus Campbell, head of sales at Capital Spreads.
“Obviously the determining factors were concerns over the euro zone debt crisis, and of course the US debt ceiling – and it looks like a deal is just about to be forged there.”
BP added 2.5 per cent, with traders citing rumours that Anadarko Petroleum will bring forward a settlement with the UK oil major over liability for the Gulf of Mexico oil spill.
Elsewhere, ITV rose 3.8 per cent as UBS retained its “buy” recommendation on the terrestrial television broadcaster.
J Sainsbury was among the biggest FTSE 100 fallers, off 0.9 per cent, hit by a downbeat note from Citigroup that kept its bearish full-year 2011/2012 estimates for UK grocers.
“Scary numbers abound,” Citigroup said in a note, pointing out that UK gross indebtedness was nearly 500 per cent of GDP, up from 200 per cent in 1990.
“The Big Four [grocers] are not preparing for a ‘new normal’ of low GDP growth, consumer thrift and slower population expansion. Rather they are all pushing for space growth, enhancing high gross margin-reliant service and meeting short-term profit goals by raising prices,” the broker said.
Wm Morrison Supermarkets was down 0.3 per cent, while Tesco, up 0.1 per cent, also underperformed the market.
ICAP and Imperial Tobacco both fell after going ex-dividend.