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FTSE surpasses 5,800 as US markets climb

MARKET BLOG: The FTSE 100 has changed direction and is now in positive territory.

 
FTSE surpasses 5,800 as US markets climb

14.43: US markets have opened higher, adding to Friday's rally.

With little financial news to dampen spirits since Friday's gains – which came amid a reassessment of comments from Mario Draghi and after better-than-expected figures on the US labour market – the Dow is up 0.5%.

European markets are also higher. The FTSE 100 has passed the 5,800 mark, at 5,819. Germany's Dax is up 0.7% and France's Cac is 1% higher.

The euro is up 0.1% at $1.239 in a week with little major European economic data due.

Markets were also buoyed by a report from the International Monetary Fund said that Greece had made progress in finding the sort of budget cuts that will earn it continued international aid. 

Falkland Oil lights up on Noble deal

10.55: Falkland Oil and Gas (FOGL.L) continued its recent good run of form, jumping nearly 10p or 13% to 85.2p, after announcing a farm-out agreement with an affiliate of US Noble Energy. Noble Energy will buy into around 35% of Falkland's northern and southern area licences around the islands, investing an estimated $180 million (£115 million) to $230 million (£147 million) in the process over three years. The share price rise leaves FOGL valued at £272 million. 

Brendan Long, analyst at Merchant Securities, retained his 'buy' recommendation but was reviewing his 75p target price. 'The involvement of a large American oil and gas company in the Falkland Islands is positive from a political perspective and this read-across extends to all the companies operating in the area,' he wrote in a note to investors.

The news is good news for the Ignis UK Focus fund, managed by Mark Holden, which was recently hit by a sharp fall in Borders & Southern (BSTH.L). The fund also holds FOGL as a top 10 position.

FTSE 100 edges towards 5,800

10.00: The FTSE 100 has changed direction and is now in positive territory, inching towards 5,800.

The blue chip index is up 7 points to 5,794, moving in on the levels it reached in early May before sharply falling. The Euronext 100 is slightly higher at 647.

The pressure on Spain and Italy eases a bit as the all-important 10-year bond yields for the former edge a little lower to 6.79% and dip to just over 6% for the latter. 

Paul Donovan, senior global economist at UBS, says markets are taking comfort from the underlying strength of policymakers' commitment to the euro, even if they are not backing up their support with detailed plans.  

He says comments from various members of the European Central Bank over the weekend echo Margaret Thatcher's famous 'The Lady is not for turning' speech. 'U turn if you want to the euro is not for turning,' Donovan says is what the ECB appears to be saying.

Stock highlights

RBS (RBS.L) rises 2.3% to 221.2p on reports that Itau Unibanco, one of Brazil's biggest banks, is planning to bid for Citizens, RBS' US business.

Barclays (BARC.L) is helped 2.1% higher to nearly 175p by the general optimism over Europe and reports that it is working on reforming its executive incentive schemes to make them more aligned to shareholders' interests.

Catlin (CGL.L) gained nearly 14p or 3.2% to 445.8p after the Bermuda-based insurer bounced back to profit in the first half of the year, helped by fewer natural catastrophe-related claims. It is iraising the interim dividend by 5% to 9.5p per share.

Morgan Sindall (MGNS.L) shed 12p or 1.8% to 67.7p after the construction group unveiled a 13% rise in fist half profits but said its market would remain challenging in the short term because of the sluggish economy.

See our FTSE home page for today's other risers and fallers.

JJB Sports leaps as Invesco plans to take control

09.10: JJB Sports (JJB.L), another struggling retailer, rises on a report that Invesco Perpetual, its biggest shareholder, is snapping up the group's debt in order to take control of the business.

JJB shares gained 7% to 6.15p after the Sunday Times said Inveso was buying the debt from Lloyds Banking Group in order to restructure the business.

According to the paper, Invesco Perpetual has lost patience with JJB which recently lost its chief executive after a string of profit warnings. The company has had a disastrous few years as it has lost market share to rival Sports Direct and hits shares have fallen 15% this year, valuing the company at just £17 million.

Neil Woodford, Invesco Perpetual's star equity income fund manager, controls nearly 25% of the company's shares, with his High Income fund alone holding nearly 13%. US value investor Harris Associates has a 26.4% stake, while the Bill and Melinda Gates Foundation owns 4.98%. Activist investor Crystal Amber also had a 7% interest.

HMV shares hit as finance director prepares to leave

08.40: HMV (HMV.L) slides nearly 6% to 3.4p as the troubled music store group confirms that finance director David Wolffe is leaving. This is a blow following so soon after chief executive Simon Fox's resignation last week.

Kate Calvert, retail analyst at Seymour Pierce, says the news will stoke fears that trading remains under pressure and that the business may not return to profit next year. She maintains her 'sell' rating saying 'there will be no let up in the structural pressures on the business from online or the supermarkets.'

HMV shares have fallen 97% in the past five years, valuing the company at just £14 million.

Wollfe joined HMV from ITV Studios at the start of last year. The company says he will remain in his post until a successor is found.

FTSE, euro dip as US banks prepare for single currency breakup

08.25: The FTSE 100 dips 12 points in early trading as investors take profits after the relief rally on Friday.

The blue chip index is 0.2% lower at 5,775 with Glencore (GLEN.L) leading the way up 1.3% to 325.25p, despite revived worries about its proposed merger with Xstrata (XTA.L), and Centrica (CNA.L) falling 1.25% to 319.5p

The euro weakens 0.19% to $1.2358 against the dollar amid reports that US banks are hedging their exposure to troubled eurozone countries in an attempt to avoid receiving payments in either drachma or pesetas should either Greece or Spain leave the single currency.

'Although this is only a precaution, it is not likely to be something to bolster confidence in Europe,' says Simon Furlong of Spreadex.

The pound also falls 24% to $1.56 against the dollar.

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