London blue chips rallied on Friday on the back of developments at the EU summit overnight, as analysts hailed the agreements as a major breakthrough.
The agreements include: the European Stability Mechanism (ESM) loan to Spanish banks will not have senior creditor status which effectively takes pressure off the country's credit spread; the ESM will also be allowed to directly recapitalise banks; the rescue funds themselves will be used more flexibly to support compliant countries; and finally, the European Central Bank (ECB) will be acting as an agent for the rescue funds in market operations.
The news fuelled a surge in stock markets across Europe today, with benchmarks in France, Italy, Spain and Germany registering gains of 4-6% by the close. London's Footsie and the three major indices in the US were up around 2% each.
US stocks were making ground despite consumer sentiment data for June hitting its lowest levels since December and consumer spending falling in May for the first time since November.
While more news will likely leak out about the meeting throughout the rest of the day and over the weekend, investors are already looking ahead to policy decisions in the UK and Europe due next Thursday. The Bank of England is widely expected to ramp up its asset purchase programme, while the ECB is predicted to cut rates to a new low.
FTSE 100: Barclays finishes in the red, but others banks rise
Yesterday's news that Barclays was found to have manipulated interbank lending rates was still weighing on the stock today as it failed to join in with the rally in equity markets. Following on from its 16% drop the day before, shares slipped a further 1.7% on Friday. The revelation has prompted calls for the resignation of Barclays CEO Bob Diamond.
HSBC, Lloyds and RBS on the other hand, finished the day strongly as they rebounded from sharp losses yesterday. However, confidence surrounding UK banks still remains low after the FSA revealed today that it had found "serious failings" in the way lenders sold complicated interest rate protection products to businesses.
In other banking news, Stephen Hester, RBS's CEO, said he would waive his bonus this year after a technical glitch at the bank left thousands of customers without access to their cash.
Water group Pennon was among the few stocks that finished in red (along with Barclays) after UBS started coverage on the stock with a 'neutral' rating. The broker said that the group, along with sector peer Severn Trent, has its relative benefits outside of M&A already priced in to the shares.
Telecoms giant Vodafone was also lower after Jefferies downgraded its rating on the stock from 'buy' to 'hold', highlighting threats from competitor fightbacks and this company's dependence on Verizon Wireless.
Outsourcing group Serco rose after completing the disposal of its Technical Services business to engineering giant AMEC for £137m.
FTSE 250: Avocet plummets after production downgrade
Avocet Mining saw its share price plunge nearly 40% after the gold miner admitted that it now expects its gold production for 2012 to be reduced from 160,000 ounces to between 135,000 and 140,000 ounces. 2013 production guidance was also lowered.
House-builder Berkeley Group jumped after seeing both revenues and profits surge in the 2011/2012 fiscal year and saying it would hit its medium-term profit targets quicker than first thought. Sector peers Persimmon, Bellway and Barratt Developments also finished the day strongly.??
Chancellor George Osborne is expected to face opposition from Treasury civil servants over his plans to sell the government's stake in part-nationalised lender RBS to the public, reports The Times. Senior officials are said to be against the idea, saying that they are over-complex and have raised concerns about the effect on the deficit. [6 Hours Ago]
Thomas Cook still has a long flight ahead of it, but the new Captain at the controls seems to have stabilised the craft. In fact, things now look normal. Above all, the company needs to sharply improve the experience of its customers, quite a challenge. However, the 1.6bn pound capital restructuring announced last week means that the outfit now has a fighting chance. Then there are the upwardly revised cost-savings targets and plans to rationalise its airlines and dealings w [Yesterday 17:30]
Banks were making a strong rise after UBS lifted its rating for the global banking sector from 'underweight' to 'overweight', saying that the operating environment is beginning to improve. In a research report titled 'Post-crisis banking', UBS said that the tone of its Global FID conference earlier this week was "neutral to slightly positive" and banks are starting to see "improving bottom-up trends". RBS led the risers, with Lloyds close behind. [Fri 14:42]
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