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China data cheers FTSE as Vodafone eyes payout
by Gavin Lumsden on Sep 02, 2013 at 09:19
The FTSE 100 got off to a strong start buoyed by the prospect of a huge windfall for Vodafone shareholders and positive manufacturing data from China.
President Obama’s decision to put an air strike against Syria on hold also calmed markets with the oil price dipping further from last week's spike.
The UK’s leading index raced 84 points or 1.3% higher to 6,497, following the lead of Hong Kong and Tokyo overnight.
Vodafone (VOD.L) helped the FTSE’s advance, putting on another 7.5p or 3.6% to 213p as the mobile phone group confirmed it was negotiating a $130 billion (£84 billion) payment in shares and cash for the sale of its 45% stake in Verizon Wireless with US partner Verizon. A further announcement could be made later today.
European telecoms extended their gains. Telecom Italia rose 3% on speculation it could become a bid target for a cash-rich Vodafone, helping Italy’s FTSE MIB index rise 1.5% to 8,454. This rally was matched elsewhere in Europe, with gains of between 1.5% and 2% for Germany, France and Spain in response to the improved China data.
The HSBC purchasing managers index (PMI) showed China’s manufacturing sector grew in August for the first time in four months. It hit 50.1, slightly above the 50-point level that separates growth from contraction. A government report on Sunday showed factory output hit a 16-month high last month.
However, China remains exposed to weak demand from the US and Europe. Meanwhile hopes of a strong recovery in Asia were dashed by weak economic reports from other countries in the region.
On Friday India revealed its economic growth slowed to 4.4% in the second quarter, its weakest level in four years. Meanwhile other PMI surveys showed manufacturing output in South Korea fell for the third month in the row and in Indonesia hit a 15-month low.
Nevertheless, the news pushed up metals prices and boosted shares in London-listed miners. Vedanta Resources (VED.L) led the way with a 4% leap to £12.07, helped by reports that former Rio Tinto chief Tom Albanese may join the Indian focused group.
International Consolidated Airlines Group (ICAG.L) added another 2.8% to 294p as the price of Brent crude slipped again from last week's highs to $113.73 a barrel.
On currency markets the yen reversed last week’s gains, falling to 98.63 to the dollar. The pound rose 0.4% to $1.5559 against the dollar, and made gains against the euro.
Gold dipped 0.2% to just below $1,400 an ounce.
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