FTSE closes above 5,800 mark after good US data boosts world outlook
B RITAIN’S top share index jumped more than one per cent yesterday after stronger-than-expected US manufacturing data gave a lift to global growth hopes, pulling commodity stocks higher.
Banks were also in demand as investor risk appetite returned. Shares of Lloyds rallied more than eight per cent after the part state-owned lender reported a £288m pre-tax profit for the first quarter, significantly better results than a year ago.
At the close, the FTSE 100 index was up 74.5 points, or 1.3 per cent at 5,812.23, ending above the 5,800 level for the first time since 3 April.
Growth in the US manufacturing sector picked up unexpectedly in April, while new orders gained, Institute for Supply Management (ISM) data showed.
“Especially encouraging, that not only the overall ISM index is showing an improvement and beat expectations but also both the ISM new order index and the employment index are showing strong gains compared to the previous month,” said Markus Huber, senior trader at ETX Capital.
Aside from the US data boost, earnings news provided the main focus for Britain’s blue chips yesterday.
Lloyds was the top blue-chip riser, jumping 8.4 per cent after its results.
Its shares had fallen by up to 10 per cent in the run-up to the results.
The bank warned of a long, hard economic recovery and said it would set aside another £375m to cover compensation for people who were mis-sold insurance. But it also said it was making progress in reducing its loan book, cutting costs and reining in bad debts – all key parts of its recovery plan.
Royal Bank of Scotland, which will unveil its first-quarter numbers on 4 May, added 4.2 per cent.
As of Monday, European quarterly earnings were enjoying a better start than for the previous quarter, although results remain mixed, with 55 per cent of companies that have reported so far having met or beaten expectations.
Imperial Tobacco was also a top blue-chip gainer, up 3.7 per cent after the world’s number four cigarette group set up a £500m share buyback and said it saw a return to sales growth as it put its 2011 problems behind it.
Away from the earnings flow, miners rallied with copper prices after the US ISM data boosted hopes for improved demand. They had earlier been hit by below-forecast PMI data from top metals consumer China.
Energy stocks also bounced higher as crude prices recovered too, with the sector depressed earlier in the session by disappointing results from BP.
BP shares ended well off session lows but still shed 0.8 per cent after the group announced a bigger-than-expected drop in profits, despite rising crude prices, as production fell after it was forced to sell fields to pay for the Gulf of Mexico oil spill.
“Both [BP’s] upstream and downstream segments missed expectations and the group miss came despite a tax rate of 33 per cent vs 37 per cent in quarter one last year,” Bernstein Research said in a note.
Hedge fund manager Man Group was the biggest FTSE 100 loser, tumbling 5.5 per cent after it said clients withdrew a net $1bn in the three months to March.
Retailers also suffered ahead of trading news.
Next, which issues a first-quarter trading update today, fell 1.1 per cent, while mid cap Home Retail Group shed 5.3 per cent, with its full-year results due today.