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Banks lift FTSE as economic confidence grows

by Gavin Lumsden on Jan 07, 2014 at 12:56

Banks lift FTSE as economic confidence grows

The FTSE 100 rose 28 points or 0.4% to 6,758, buoyed by Lloyds Banking Group (LLOY.L), up 2.4% to 82p, and HSBC Holdings (HSBA.L), up 1.5% to 670p, after a positive survey from the British Chambers of Commerce.

The BCC estimated the UK economy grew by around 0.9% in the fourth quarter of last year, up from 0.8% in the previous three months. It said more of its members planned to recruit staff, with services companies reporting their highest level of exports since its survey began in 1989.

Manufacturers suffered a dip in sales and exports but expressed confidence that their profits and investment levels would rise this year.

David Kern, chief economist at the BCC, said: ‘With most key balances in this quarter higher than their pre-recession levels in 2007, it is clear that the UK recovery is likely to continue to strengthen in the short term.’

The news failed to lift the pound, however. Sterling traded slightly lower at $1.640 to the dollar on fears the Bank of England’s monetary policy committee may push back expectations of when interest rates may rise after its two-day meeting ends on Thursday.

European stock markets also notched up their first significant gain of the year. The FTSE Eurofirst 300 added over seven points or 0.5% to 1,316.5 after good data from Germany and Spain.

German investor confidence was boosted by a surprise fall in unemployment with the seasonally adjusted figure dropping 15,000 to 2.965 million, although the rate of joblessness was unchanged at 6.9%. Meanwhile, signs that the ‘periphery’ of the eurozone was pulling through the crisis came from Spain recording its highest services sector growth for six-and-a-half years.

Back in London, Severn Trent (SVT.L) was the biggest faller on the FTSE 100, down 2.3% to £16.64 after JP Morgan downgraded the utility to 'underweight' from 'neutral' and cut its target price to £15.35 from £16.80.

Royal Mail (RMG.L) retreated 6.5p or 1.1% to 565.5p after Robin Byde, analyst at Cantor Fitzgerald, started coverage of the stock with a ‘sell’ rating and a 500p price target saying it was no longer good value after the ‘spectacular’ rise in the share price since flotation.

J Sainsbury (SBRY.L), down 3.2p to 364p, and Wm Morrison (MRW.L), off 3.9p at 252.4p, dipped after Barclays analysts lowered sales targets for when the supermarkets report this week.

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