FTSE enjoys some breathing space as bargain-hunters prompt gains
BRITAIN’S benchmark share index recovered yesterday from stinging losses during the previous session as bargain hunters snapped up beaten-down financial and commodities stocks, although traders said any rally could prove short-lived.
The blue-chip FTSE 100 index closed up 83.64 points, or 1.6 per cent, to 5,350.05 points.
It fell 2.5 per cent on Wednesday to a new 2012 closing low of 5,266.41 due to persistent fears that Greece may have to leave the Eurozone, and its rally yesterday still left it shy of the 5,400 level seen as key to triggering further buying.
“I see a continuation of this momentum going into tomorrow, in the absence of any fresh negative news, but my general bias would still be to sell into strong rallies,” said Hartmann Capital equities and derivatives sales trader Basil Petrides.
Franklin Templeton fund manager Colin Morton agreed that underlying fears about the debt crisis in Greece, and the impact that a Greek exit from the euro zone could have on the global economy, would limit any gains made in the coming days.
“I’ve moved a little bit of money off expensive, defensive stocks and towards more cyclical stocks that have had a bad run,” said Morton.
“But for the market to make significant progress, there has to be a dramatic change in how people feel and at the moment, there is still too much uncertainty,” he added.
Mining company Randgold Resources topped the FTSE 100 leaderboard after its shares closed up eight per cent.
Traders cited several reasons for the stock’s rise, such as the fact that directors had bought the company’s shares earlier in the week and a recovery in the price of gold.
They added that Randgold, whose shares are still down 21 per cent since the start of 2012, was tracking gains in South African gold miners, such as Harmony Gold, whose shares also rose after investors bet that their prices had fallen too far during a recent decline in the gold price.
Hartmann Capital’s Petrides said he had considered buying oil major BP, which also rose 3.3 per cent, but instead bought shares in financial companies, which have slumped this month on fears of their exposure to Europe’s debt crisis.
Petrides bought UK bank Barclays and insurers Prudential and Aviva yesterday, whose shares also made ground, with Prudential rising 3.4 per cent.
“These stocks tend to outperform when the market goes up. Their dividend yields are good and they have good quality earnings,” he added.
Others were more cautious, given the uncertain outlook for markets ahead of a 17 June election in Greece, where voters have rejected austerity measures imposed on it by the European Union and International Monetary Fund in an earlier bailout deal.
“It’s still a risk-off market,” said Charlotte Square fund manager Amanda Forsyth, who has remained underweight on equities and overweight in cash, with safe-haven asset classes such as the US dollar, US Treasury and German bund all having risen in recent weeks.
Outside the top flight, Mothercare soared 24 per cent after it unveiled better than expected results a tough cost-cutting plan.