FTSE ends best month since October as oil provides boost
BRITAIN’S top share index got a boost from strong corporate results, higher oil prices and improved risk appetite yesterday, enabling it to post its best performance in three months in January.
After a gloomy 2011 – when the FTSE100 lost 5.6 per cent – the new year has heralded a cautious return to risk, with British fund managers raising equity allocations to 49.9 per cent and cutting cash, according to a Reuters poll.
London’s benchmark index closed up 10.52 points, or 0.2 per cent, at 5,681.61 yesterday. That takes its gains for January to two per cent – its best showing since a strong rally in October and offering investors the chance to earn as much in one month as they would in a whole year of holding gilts.
VOLATILITY INDEX FALLS
The FTSE volatility index – a gauge of investor risk aversion – eased nearly three per cent from Monday’s two-week highs after Greece reported “significant progress” in its debt restructuring talks. Investors have been worried about the possibility of a messy default in Greece, which would strike a heavy blow to the Eurozone, Britain’s biggest trading partner.
Overnight, the European Union also agreed to a German-inspired pact for stricter budget discipline, which it hopes will tackle the underlying causes of the region’s debt crisis.
“It’s a response to what happened overnight, and hoping that we will have some sort of conclusion with regards to Greek debt,” Dwight Burden, who works in equity sales at Merchant Securities, said of yesterday’s stock market gains.
ARM LEADS CORPORATES
Strong corporate earnings also boosted the FTSE.
ARM Holdings added two per cent. The British chip designer, whose technology powers Apple’s iPad and iPhone, reported a 45 per cent rise in quarterly profit and said its growth would continue to outstrip the industry.
“Given Apple’s blowout numbers last week it would have been surprising if they hadn’t done well,” Michael Hewson, market analyst at CMC Markets, said.
Solid results also helped boost pay-TV group BSkyB and miner Vedanta Resources, which added 3.7 and 1.6 per cent respectively.
National Grid gained three per cent as Britain’s biggest energy distributor said the outlook for the year remained positive and announced plans to increase its dividend — a key factor for investors looking for a steady return at times of ultra-low bond yields.
OIL PRICE LIFTS BP
Energy companies led the advance among the sectors. North Sea Brent crude jumped as much as $3 per barrel at one point, pushing shares in FTSE heavyweight oil major BP 2.7 per cent higher.
European stocks also rose yesterday on renewed hopes for a Greek debt deal, though gains were capped by weaker-than-expected US data that cast doubt on the strength of the world’s biggest economy.
The FTSEurofirst 300 index of top European shares rose 0.7 per cent to a provisional close of 1,037.62 points. It gained 3.6 per cent in the month of January.