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Market Blog: FTSE ends the week up on ECB hopes

Markets across Europe make gains on hopes for action from the European Central Bank (ECB).

 
Market Blog: FTSE ends the week up on ECB hopes
  • US GDP rises 1.5%; Lagarde warns on fiscal cliff
  • German finance minister welcomes ECB support
  • Anglo American operating profits plummet 38%
  • Pearson falls to bottom of index
  • Barclays beats forecasts to top FTSE 100
  • FTSE 100 gains continue; Barclays tops index

17.00: Britain’s markets strengthened in Friday trade on hopes the European Central Bank (ECB) would act to save the eurozone following comments from Mario Draghi, the president of the bank, that he would do ‘whatever it takes’ to solve the crisis.  

The FTSE 100 took on 0.97%, or 54 points, to hit 5,627 and the Mid-250 index rose 1.26%, or 139 points, to 11,179.

This brings to a close another flat week for the index, as the FTSE 100 lost 25 points and the Mid-250 inched ahead 11 points.  

Promises from the ECB president also quelled fears in European markets, and Spanish 10-year bond yields closed below 7%, narrowing eight basis points throughout the day from 6.84% to 6.76%.

Germany’s DAX index rose 1.62% to 6,689, France's CAC 40 index jumped up 2.28% to 3,280, and the FTSEurofirst 300 index of top European shares took on 1.25% to 1,056.

On the FTSE 100 Barclays (BARC.L) continued to surge, rising 13.4p, or 8.7%, to 167p as it posted a £4 billion adjusted pre-tax profit in the first half of 2012.

US GDP rises 1.5%; Lagarde warns on fiscal cliff

14.20: US gross domestic product (GDP) for the second quarter has been confirmed as rising 1.5%, largely in line with expectations.

Wall Street opened on the front foot following the news, with the Dow Jones Industrial Average adding 0.51% to 12,954 and the Nasdaq Composite index rising 0.55% to 2,909.

Rob Carnell, chief international economist at ING, was unimpressed by the GDP figure: ‘It does not look as if this is a turning point for the US economy, from which growth will pick up, rather a reflection of the dismal trend at which the economy is moving.’

The figures come as Christine Lagarde, managing director of the International Monetary Fund (IMF), said the biggest threat to the world economy was the approaching US fiscal cliff.

The fiscal cliff could hit at the end of the year, when a number of tax increases and spending cuts are due to come into effect. If lawmakers don’t agree on an alternative before then it could affect growth, pushing the country back into recession.

German finance minister welcomes ECB support

14.00: European markets continued to make gains as Wolfgang Schaeuble, German finance minister, welcomed the European Central Bank (ECB)'s show of support for the single currency.

Schaeuble’s comments came after Mario Draghi, president of the European Central Bank (ECB), said he would do ‘whatever it takes’ to keep the eurozone together.  

Germany’s DAX index took on 0.03% to 6,587, France's CAC 40 index added 1.04% to 3,240, and the FTSEurofirst 300 index of top European shares rose 0.62% to 1,049.

The news comes as Spain discusses the possibility of needing a full €300 billion (£235 billion) bailout as its bond yields remain above 7%, according to a Reuters report.

The report has been denied by the Spanish government. Peter Garnry, equity strategist at Saxo Bank, said: ‘Spain's deputy prime minister Soraya Saenz de Santamaria just did the financial crisis communication mistake 101 saying: "I will respond with absolute clarity: the government will not seek a rescue nor is seeking for a rescue an option."

‘When those comments begin to fly you know it's because they feel the pressure and know it is confidence game. But as soon as you go out saying nothing is wrong and a rescue is not part of the plan, it is precisely what could happen.’  

Anglo American operating profits plummet 38%

 

11.50: Miner Anglo American (AAL.L) drifted down to replace Pearson (PSON.L) at the bottom of the FTSE 100 as its first-half operating profit dropped 38% as a result of weak commodity prices and rising costs.

The group reported an operating profit of $3.7 billion (£2.4 billion) in the six months to the end of June.

Further disappointment came as Anglo revealed another 12-month setback to its Brazilian iron ore project, Minas Rio. Production at the site has been held up by licensing problems, and it is now expected to start exporting ore in late 2014, a year behind schedule.

Cynthia Carroll, Anglo American chief executive, said: ‘Despite the macroeconomic uncertainty and likely sustained higher capital and operating cost environment for the industry, we are committed to returning cash to shareholders and have increased our interim dividend by 14% to US 32 cents per share.’

Pearson falls to bottom of FTSE 100

11.00: Publishing group Pearson (PSON.L) fell 45p, or 3.5%, to £12.49 at the bottom of the FTSE 100 index as pre-tax profits declined 28% in the first six months of the year.

The group reported pre-tax profits of £59 million in the first half, down from £82 million in the same period of 2011 due to the sale of its 50% stake in FTSE International and increased investment in the business.

However, the owner of Penguin Books and the Financial Times reported revenues for the overall group increased 7% in the period and it remains on track to meet its full-year forecasts. Analysts at Numis cut their rating on Pearson from ‘add’ to ‘hold’.

The stock is a top holding in Sanjeev Shah’s Fidelity Special Situations fund, a Citywire Selection star pick and Nick Train’s Lindsell Train UK Equity fund.

Barclays beats forecasts to top FTSE 100

09.10: British bank Barclays (BARC.L) took on 7.6p, or 4.9%, to 161p as it beat forecasts to make a £4 billion profit in the first six months of the year.

Adjusted profit before tax rose 13% on the same period last year to £4.23 billion in the first six months, mainly driven by its wealth and investment management arm, where profits increased 38%.

Marcus Agius, chairman of the bank, also apologised for the Libor-rigging scandal and the ‘challenging times’ the bank faces.

The stock features in Richard Buxton’s Schroder UK Alpha Plus fund and Edward Legget’s Standard Life Investments UK Equity Unconstrained fund, although it has fallen out of Citywire Top Stocks.    

FTSE 100 gains continue; Barclays tops index

08.45: Britain’s markets rose for a second day, tracking overnight gains in Asia, after pledges that the European Central Bank will back the single currency.   

The FTSE 100 added 0.06%, or four points, to 5,577 and the Mid-250 index rose 0.45%, or 49 points, to 11,090.

Barclays (BARC.L) added 6.7p, or 4.3%, to 160p, rising to the top of the FTSE 100, after adjusted profits beat expectations to rise 13% on last year.

07.50: The FTSE 100 is expected to open around 25 points, or 0.5%, higher as markets extend their gains on hopes of strong intervention by the European Central Bank (ECB).

The FTSE 100 closed 75 points, or 1.4%, up after Mario Draghi, ECB president, said he would do ‘whatever it takes’ to save the euro. Although he did not say what action he would take, there are hopes this could include giving Europe’s bailout fund a banking licence so it can borrow from the ECB to buy Italian and Spanish government bonds and reduce those countries borrowing costs.

Barclays (BARC.L) has reported half-year pre-tax adjusted profits of £4.2 billion, up 13% on a year ago and ahead of analysts’ forecasts.

Pearson (PSON.L)'s half-year operating profits have dropped 10% to £188 million on sales 6% higher at £2.58 billion. The education publisher and owner of the Financial Times says the year is turning out to be tougher than expected.

Burberry (BRBY.L) says its discussions with Interparfums have ended and it continues to pursue other options to develop its fragrance and beauty business.

Insurance broker Jardine Lloyd Thompson (JLT.L) reports half-year pre-tax profits up 12% to £89.4 million and an interim dividend of 9.6p per share.

Spectris (SXS.L) announced an 18% leap in half-year pre-tax profits to £92 million on sales 13.5% higher at £596.7 million. It will pay an interim dividend of 13.5p per share.

Carphone Warehouse (CPW.L) says like-for-like sales in the first quarter fell 2% and says the pre-pay market continues to be weak.

William Hill (WMH.L)'s half-year profits rise 13% to £143.3 million, with the bookie expressing its confidence in the rest of the year by declaring a 17% increase in the interim dividend to 3.4p per share.

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