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Pension deal propels BT to top of rising FTSE

But the eurozone’s woes shifted back into focus as investor sentiment weakened in Asia overnight.

 
Pension deal propels BT to top of rising FTSE

Britain’s FTSE 100 ticked up in Friday trade as BT (BT.L) bounded to the top of the index after announcing plans to pay off its pension deficit.

The benchmark UK index of blue-chip shares rose 0.44%, or 26 points, to 5,872 and the Mid-250 index took on 0.39%, or 45 points, to 11,597. See the FTSE’s performance.

Citywire Top Stock BT added 10.7p, or 4.8%, to 231.2p, jumping to the top of the FTSE 100 as it announced it will pay off its pension deficit over the next nine years. The group will start by putting £2 billion into the fund this month and continue to pay off the debt with instalments of £325 million into its pension pot until 2021.

The amount is less than previously estimated, when it was expected the group would pay £525 million each year, over the next 17 years to clear it debts.

Spanish and Italian bond yields rise

The eurozone’s woes shifted back into focus as investor sentiment weakened in Asia overnight. On Wednesday China’ flash purchasing manager’s index (PMI) fell from 49.6, to 48.1, signalling a slowdown in production. The impact was heightened as PMIs for France, Germany and Europe also showed a slowdown in output, reigniting fears the region could face a double dip recession.

Markets slid with China’s Shanghai Composite Index dropping 25 points, or 0%, to 2,351%; Japan’s Nikkei 225 index falling 115 points, or 1.14%, to 10,012; and Hong Kong’s Hang Seng index lower by 236 points, or 1.1%, to 20,663.

In Europe the yield on Spanish 10-year bonds rose 3 basis points to 5.5%, and 10-year Italian bonds shed 4 basis points to 5.12%, causing concern that two of the eurozone’s bigger economies could soon be forced to borrow money at unsustainable levels.

Simon Furlong, trader at Spreadex said: ‘With doubts resurfacing over the strength of the world economy yesterday, minds naturally have started to focus back on Europe and their debt situation. Spanish yields have risen above 5.5%, and Italy’s yields broke through the 5% level as concerns over growth in Europe hit the market.

‘With countries such as Germany suffering in this economic climate, then how are countries such as Italy and Spain supposed to cope, especially when their levels of debt are as high as they are. Investors are starting to wonder whether the two LTROs issued by the ECB are starting to wear off already,’  he said, referring to the market-boosting three year loan scheme from the European Central Bank.

Later today new UK mortgage approval figures and US home sales figures could counter the mood. 

European stock markets made cautious gains: Germany’s DAX index rose 0.42% to 7,010; France's CAC 40 index took on 0.36% to 3,485; and the FTSEurofirst 300 index of top European shares increased 0.34% to 1,083.

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