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Market Blog: bargain hunters drive FTSE to strong finish

'Can we string more than just a one-day bounce together before we have another big sell-off?' ask brokers.

 
Market Blog: bargain hunters drive FTSE to strong finish

16.39: Bargain hunters maintained the upper hand at the end of UK trading on Thursday, driving the FTSE 100 to close 95 points higher at 5,361.

Market pundits, though, are quick to note that nothing has changed – the same concerns about the eurozone remain (see below) – and we have yet to see any real traction. 'Can we string more than just a one day bounce together before we have another big sell off?' asked brokers Fox Davies in a note. Expect more caution, more volatility.

15.46: Protect your portfolio from a eurozone contagion scenario, said Societe Generale in a conference call. Shell (RDSb.L), Reckitt Benckiser (RB.L) and Tesco (TSCO.L) are their UK picks among European stocks that have strong balance sheets, high exposure to emerging markets and liquidity. They say go underweight equities, but within that UK and Japan shares are overweight.

14.50: Analysts at Citigroup are so certain that Greece will leave the euro that their newly published euro area economic forecasts for 2013 onwards simply exclude the country.

‘We have therefore revised down our 2013 GDP forecasts for all euro-area countries compared to last month and expect the euro area to contract by 0.7% next year. Although we have revised up our 2012 GDP forecast by 0.4 points to -0.6% to reflect better-than-expected Q1 data, we expect the region to move into recession in 2H,’ they say.

 Chris Marshall

14.35: US markets struggling to find direction at the opening bell as some sluggish economic data hold back the bargain hunters. The Dow was flat at 12,489, the S&P 500 at 1,319 and Nasdaq at 2,844.

Initial jobless claims in the US inched down 2k in the week ending 19 May, while durable goods orders rose by just 0.2% month on month in April. Both were in line with the market consensus.

Over in Europe – which is setting the tone for all global markets – European Central Bank president Mario Draghi used a speech in Rome to emphasise that it would take time for the full benefits of the Bank's ‘LTRO’ loan scheme to be seen. The scheme helped the market rally that started in December but has since turned into a prolonged sell-off.

Draghi, under pressure to do more to tackle the crisis, repeated his message that it is up to banks and governments to do more, suggesting that the latter must take a 'courageous leap' to do so, according to reports.

 Chris Marshall

11.58: Now we might be getting somewhere. The FTSE 100 is now 74 points, or 1.4%, up on the day at 5,341 as investors pick up battered stocks.

Randgold Resources (RRS.L), the £4.3 billion mining giant, leads the FTSE 100, 6% or 293p up at £50.80.

Mothercare (MTC.L) leads the FTSE 250 as it rises from the doldrums with a 16.7% or 27.5p rise to 192p with Cable & Wireless Communications (CWC.L) and Thomas Cook (TCG.L) hot on its heels.

Best not to get too carried away though. We're not out of the woods and the index is still down 4% year to date.

Homeserve (HSV.L) is down another 2.5% or 3.8p to 147p after yesterday's results and news of a formal inquiry by the Financial Services Authority. 

You can see more of the FTSE risers and fallers

– Gavin Lumsden

11.42: Standard Life Investments has trimmed its stake in Cookson (CKSN.L), the materials technology company that is considering a demerger, to just below 9%. Meanwhile, Cevian Capital, the activist shareholder chaired by Lord Myners (pictured) which has a seat on the board, increased its position to over 20% this week.

Standard Life held more than 11% last November. Cookson is in Citywire Top Stocks because of its top 10 holding in Ed Legget's Standard Life Investments UK Equity Unconstrained fund. The shares are up half a penny to 649p. They've risen 27% this year.

– Gavin Lumsden

11.26: F&C Capital & Income investment trust says the bid battle for Cove Energy (COVE.L), which currently sees Shell (RDSb.L) losing to PTT Exploration and Production of Thailand, helped the fund grow net asset value per share by 13% in the six months to the end of March. Add in the dividends and it just beat the FTSE All Share with a total NAV return of 15.5%.

Long term though the £178 million fund is not a contender in the UK Growth & Income sector. Shares unchanged at 204p.

– Gavin Lumsden

11.08: Dr Holger Schmieding, chief economist at Berenberg private bank, has compiled a useful eurozone 'to do' list. Among the measures he'd like are a commitment from eurogroup finance ministers that no other country is forced into a death spiral (my words not his).

He writes ministers 'should reassure markets that no other country will be pushed into the Greek trap of ever more austerity causing an ever deeper and costlier recession that requires the country to cover fiscal shortalls through more tax hikes which, in turn, exacerbate the shortfall in demand.'

Schmieding says once ministers approve Spanish, Italian and Portuguese budget and reform plans they should send a clear signal that if these countries had to ask for help they would receive it without having to tighten the fiscal screws past breaking point.

– Gavin Lumsden

10.31: Chris Beauchamp of IG Index says if we hadn't the 'mother of all sell-offs' yesterday we would have had a sharp drop today with all the bad data out of China, eurozone and UK.

Attention turning to the US data splurge this afternoon when we'll get info on jobless claims, durable goods and the Kansas Fed index. 

– Gavin Lumsden

10.02: The ONS says exports to the rest of the world outside the eurozone have 'shown some strength' in the past 18 months. Let's hope that continues!

The pound has fallen 0.15% against the dollar to trade at $1.566. The FTSE 100 is doing better, 28 points up at 5,295. The yield on 10-year gilts has risen slightly to 1.77% but the Reuters chart I'm looking at shows the remorseless slide in yields in the past 10 years as the price of UK government bonds has shot up. 

– Gavin Lumsden

09.45: The recession is worse than we thought. The Office for National Statistics has revised its first quarter GDP figures and says the economy shrank by 0.3% in January to March, not the 0.2% it said previously. A slump in construction work is to blame. Strangely, government spending made the biggest contribution to growth.

Here is Chris Marshall's story on the figures.

– Gavin Lumsden

09.08: Shares in volatile AIM technology stock Pursuit Dynamics (PUDY.L) are up 22% to 12p this morning. This follows a recent sharp sell-off, when the company said a deal to provide technology to Procter & Gamble had fallen through.

As a result of that failed deal, the company this morning said revenues for the year ending 30 September 2012 ‘will be materially below the company’s earlier expectations’.

Pursuit is accelerating a strategic review in light of the P&G decision, it said, with an update due by the end of June.

The shares are a favourite of several top fund managers including Thomas Dobell, who runs the M&G Recovery Fund , a Citywire Selection pick.

- Chris Marshall

09.02: The yield on 10-year gilts, or UK government bonds, has fallen below 1.75% for the first time.

And the euro continues to lose value as fears over a Greek exit from the eurozone persist, dropping to $1.253 against the US dollar, almost a two-year low.

Reaction to eurozone manufacturing and service sector surveys, and other European data, is coming in: it's 'dismal' and 'horrible', with 'no redeeming features' say economists.

Meanwhile, the FTSE 100 has given up some of its gains at 5,273, while other European markets remain broadly flat.

- Chris Marshall

08.04: The FTSE 100 opens up as investors find some cheap buys after yesterday’s sharp sell-off. The index stood at 5,321, up 54 points or just over 1% just after the 8am open.

Last night’s summit of European leaders provided little concrete news, with key decisions shifted until a June summit. Leaders did, however, emphasise that they were committed to Greece remaining in the eurozone, while confirming that they still want fiscal consolidation alongside plans to boost growth.

There was bad news from China this morning, with the HSBC flash manufacturing PMI for China dipping to 48.7 in May from 49.1 in April, the seventh below-50 reading in a row.

But on a more positive note, data this morning showed Germany is back in growth. This morning a second estimate of German first-quarter GDP showed 0.5% quarter-on-quarter growth, from -0.2% in the fourth quarter of 2011

In the UK, only a handful of shares start in the red, and early winners include Burberry (BRBY.L) after yesterday's strong results pleased analysts (Liberum say 'buy', Charles Stanley 'hold'), with shares up 30p or 2.1% to £13.97.

– Chris Marshall

See our round up of the day’s newspaper headlines here.

And the overnight market report covering the US and Asia here.

1 comment so far. Why not have your say?

Drake

May 24, 2012 at 12:50

Oh good, I was beginning to think there was some sort of problem with the eurozone.

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