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Market Blog: FTSE rises as ECB vows to save eurozone

Market Blog: FTSE rises as ECB vows to save eurozone

  • Wall Street rises on Europe hopes
  • FTSE rallies on Draghi's eurozone pledge
  • ITV, Unilever and Reed Elsevier among FTSE 100 risers
  • Centrica’s profits soar after home gas bills leap 18%
  • Lamprell shares tumble 40% on worsening loss estimate 
  • Energy firms drag on FTSE as oil price hits earnings
  • Lloyds reports half-year loss as PPI costs rise

17.00: Britain’s markets rose after Mario Draghi, president of the European Central Bank (ECB), pledged to do ‘whatever it takes’ to save the single currency at conference in London on Thursday.

The FTSE 100 rose 1.38%, or 75 points, to 5,574 and the Mid-250 index added 1.08%, or 117 points, to 10,990.

John Higgins, economist at Capital Economics, said: ‘The yield on 10-year government bonds in Spain and Italy both plunged after the ECB president hinted that the Bank might restart sovereign bond purchases under its Securities Market Programme, which has been dormant for around four months.

‘Equity prices rose sharply, too, while the euro itself gained more than 1% against the dollar… meanwhile, the crisis in the eurozone is as much about growth as it is about debt. Buying sovereign bonds does nothing to address the fundamental problem of a lack of competitiveness that plagues troubled eurozone countries.’

Miner Polymetal (PLY.L) added 62p, or 7.6%, to 873p to rise to the top of the FTSE 100 despite its target price being reduced from £16.40 to £15.90 by analysts at HSBC.

Lamprell (LAM.L) fell 38.5p, or 31%, to 84.8p, closing at the bottom of the FTSE 250 index, as it further increased its expected losses from $20 million to $45 million in the first half of the year. It is seeking to waive a number of its covenants with banks.

Wall Street rises on Europe hopes

15.30: Markets stateside have joined in the rally following comments from Mario Draghi, president of the European Central Bank (ECB), that he would put his full support behind the success of the single currency.

On Wall Street the Dow Jones Industrial Average took on 1.86% to 12,914, the Standard & Poor's 500 index added 1.55% to 1,359, and the Nasdaq Composite index rose 1.67% to 2,902.

The comments from Draghi indicate that action can be expected from the ECB to relieve Spanish and Italian bond markets, and they suggest further euro-style quantitative easing in the form of liquidity injections like the Long Term Refinancing Operation (LTRO) could be on the cards.

The US dollar fell 0.94% to 82.7 cents against the euro as markets became more upbeat about the outlook for the single currency.

FTSE rallies on Draghi's eurozone pledge

14.20: Markets across Europe have risen after Mario Draghi, president of the European Central Bank (ECB), pledged to put his full weight behind saving the eurozone.

The FTSE 100 rose 1.38%, or 75 points, to 5,574 and the Mid-250 index added 1.08%, or 117 points, to 10,990.

Draghi said at a conference in London he would do ‘whatever it takes’ to preserve the single currency region. The announcement comes as Greece has veered off track with its austerity plans and as pressure increases on Spain.    

The yield on 10-year Spanish bonds tumbled 39 basis points on the announcement, falling from 7.4% to 7%.  

Markets on the continent also gained: Germany’s DAX index took on 1.78% to 6,521, France's CAC 40 index ticked up 3.06% to 3,176, and the FTSEurofirst 300 index of top European shares increased 1.93% to 1,038.

ITV, Unilever and Reed Elsevier among FTSE 100 risers

11.30: A host of Citywire Top Stocks are moving ahead on the FTSE 100 index today, as first-half reporting season gets into full swing.

Broadcaster ITV (ITV.L) rose 4.8p, or 6.8%, to 76.3p to top the FTSE 100 as its production studios reported a 34% increase in year-on-year revenues to £355 million in the first six months of the year.

However, overall year-on-year pre-tax profits fell 8% in the first half as advertising UK revenues fell, and ITV expects September revenues to be down by as much as 5%. The group features in Top Stocks as a top holding in Derek Stuart’s Artemis UK Special Situations fund.

Consumer goods producer Unilever (ULVR.L), which also features in Stuart’s fund, is also rising, up 94p, or 4.4%, to £22.34 as it beat expectations of a slowdown in consumer spending. Its sales rose 5.8% in the second quarter, ahead of analyst expectations of 4.8%.

It’s a good day for Stuart’s fund, as another of his top holdings, Reed Elsevier (REL.L), added 23p, or 4.6%, to 540p as revenues increased 5% in the first six months of the year.

Rolls Royce (RR.L), a holding in Richard Buxton’s Schroder UK Alpha Plus fund, took on 40p, or 4.8%, to 869.5p as it reported a 5% rise in underlying revenues in the first half.

Centrica’s profits soar after home gas bills leap 18%

10.00: British Gas owner Centrica (CNA.L) has announced a 23% increase in operating profits from its UK operations as it benefited from consumer gas price increases.  

British Gas residential made £345 million in the first half of the year after gas bills increased 18% last August. Although its gas revenues increased 21% in the first half, consumption rose only 3.5%.

Profits are also higher than last year as it delayed passing on increased gas prices to customers. Shares in Centrica added 4.1p, or 1.3%, to 315p on the announcement.

The company features in Citywire Top Stocks in Richard Buxton’s Schroder UK Alpha Plus fund and is also a top holding in Sanjeev Shah’s Fidelity Special Situations fund, a Citywire Selection pick.

Lamprell shares tumble 40% on worsening loss estimate

09.20: Oil rig building group Lamprell (LAM.L) languishes at the bottom of the FTSE 250 after the shares lost 50p, or 41.8%, to hit 71.75p. The decline followed the announcement that it expects first-half losses to more than double from $20 million to $45 million as a result of delays in delivering a number of projects.

The company will request covenant waivers and has revised its delivery schedules. Lamprell shares have lost 81% of their value so far this year after it cut profit forecasts by 60% in May. Company managers are being investigated for selling shares ahead of the shock warning. 

Energy firms drag on FTSE as oil price hits earnings

08.09: Big energy companies are dragging the FTSE 100 lower as they reveal the impact of a falling oil price on their earnings.

Royal Dutch Shell (RDSb.L) reported a decline in second-quarter 2012 earnings to $6 billion compared with $8 billion in the same quarter a year ago, as falling energy prices took their toll.

Shell, the biggest faller on the FTSE 100 this morning, announced an interim dividend of US$0.43, an increase of US$ 0.01. Shares are down 2.5% to 2207p.

Shares in BG Group (BG.L) are down 2.1% at 1193p after the company posted a 4% fall in second quarter earnings and downgraded its 2012 production forecasts.

BP (BP.L), which reports earnings on Tuesday next week, followed the pair lower, with shares down 0.8% to 425p.

Oil prices rose in the first few months of the year, but then began falling in March as demand fell amid the worsening global economic outlook. Brent crude futures are now trading at a still-elevated $103.

The FTSE 100 has opened slightly lower at 5,489.

Lloyds reports half-year loss as PPI costs rise

07.56:
Lloyds Banking Group says it is shaping up, blaming a half-year loss of £641 million on past troubles such as the mis-selling of payment protection insurance (PPI).

The loss compares with a loss of £2.27 billion in the same period last year.

PPI redress and administration cost the group another £700 million in the second quarter of the year, following an additional £375 million provision in the first quarter. This comes on top of £3.2 billion in PPI costs last year.

The part government owned group said it was on track to meet 2012 financial guidance and boasted a strengthening of its balance sheet, with decreased reliance on wholesale funding.

Analysts have recently taken a bit more of a shine to Lloyds, saying it will benefit the most from emergency Bank of England measures to get the economy moving, while it could suffer the least by regulatory reforms being imposed on British banks.

António Horta-Osório, Lloyds chief executive, said the group would restart dividend payments ‘when the financial position of the group and market conditions permit, and after regulatory capital requirements are defined and prudently met’.

On wider markets the FTSE 100 is expected to open slightly higher this morning, recouping some of its recent losses.

Yesterday the S&P 500 and the Nasdaq fell after disappointing results at Apple and an unexpected drop in new home sales, while a rally in bank and industrial shares lifted the Dow Jones.

Asian shares put in a mixed performance, with Japan’s Nikkei 225 up 0.9% and the Hong Kong Hang Seng up 0.1%, but mainland China and Indian shares slightly lower.

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