The FTSE has see-sawed as concerns over geopolitical instability and the European banking sector have continued to take their toll on investor sentiment.
The FTSE 100 was up 18 points, or 0.3%, at 6,697 points having flipped between gains and losses in choppy trading. Relief from Friday’s weaker-than-expected US jobs figures, which calmed fears of an earlier-than-expected hike to interest rates in the world’s biggest economy, has proved short-lived.
Russia sanctions and the conflict in the Middle East have weighed on the market, while a rescue deal for Portugal’s troubled Banco Espirito Santo (BES.LS) provided only small relief.
Portugal has agreed to spend €4.9 billion to keep the it afloat, splitting the bank between ‘good’ and ‘bad’ divisions. But while the news led to a rally in the shares of a number of other Portuguese banks – Banco Espirito Santo shares are suspended – concerns over the rest of the European banking sector remain.
‘We are told that this problem is likely to remain a fairly concentrated one, but if anyone truly believes that then they are truly kidding themselves,’ said Michael Hewson, chief market analyst at CMC Markets.
‘With the European Central Banks asset quality review well under way, this bail out or recapitalisation is unlikely to be the last, if these mandated stress tests are to be treated as in any way credible.’
The pound rose on news of positive UK construction purchasing managers’ index figures. The survey revealed that activity in the sector was strong in July, with a reading of 62.4, down from 62.6 in June. Any reading above 50 indicates expansion, and investors had been expecting a more substantial drop.
‘The purchasing managers’ survey indicated that construction activity was robust in July, which provides reassuring evidence that the sectors’ upturn remains firmly intact despite construction output estimated to have contracted an estimated 0.5% quarter-on-quarter in the second quarter according to the preliminary gross domestic product data,’ said Howard Archer, chief UK and European economist at IHS Global Insight.
The news helped the pound lift off one-month lows against the euro, to trade at around 79.79p per euro, while its rate against the dollar rose to $1.6827.
Intertek (ITRK) was the biggest riser on the FTSE 100, rising 2.2% to £25.89 after the group, which checks goods to ensure they comply with regulatory standards, said it was on track to deliver single-digit revenue growth in 2015 as it posted a 6.7% rise in half-year pre-tax profit.
However, it wasn’t enough for Shore Capital analyst Robin Speakman to shift his ‘sell’ recommendation for the stock.
‘Management state in the report that along with returning positive organic rates (we note that like-for-likes relatives ease materially in the second half of the year), growth is expected to be boosted in the second half by a return to higher levels of acquisitive activity; we shall see, but we remain healthy sceptics of the company’s ability to return growth to underlying double-digit levels in the near term via a large transaction.’
HSBC (HSBA) edged up 4.3p, or 0.7%, to 633.7p after the bank reported a 12% drop in pre-tax profits in the six months to the end of June to $12.3 billion (£7.3 billion), just below analysts’; expectations of profits of $12.5 billion.
‘Mid cap’ stock Balfour Beatty (BALF) rose 2.7% to 246p after the Sunday Telegraph reported UK engineering firm WS Atkins (ATKW) and Canadian group WSP Global (WSP.TO) were battling for control of its engineering and design business.
Fellow FTSE 250 stock Keller (KLR) rose 4% to 910p as the ground engineering contractor reported pre-tax profits rose 21% in the first half of the year. ‘This is a positive set of results, with clear evidence of a recovery in its core end markets,’ said Investec analyst Andrew Gibb, who has a ‘buy’ recommendation on the stock. ‘We see current levels as an attractive entry point for a stock with continued significant earnings momentum ahead, on a continued recovery in its core end markets.