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.??
Mining stocks were under pressure as commodity prices declined with precious metals peers Fresnillo and Randgold tracking gold and silver lower early on. As well, in a research note issued today analysts at Citi wrote that: "We remain underweight the gold and base metals stocks and our least favoured name among the large-cap miners is Anglo American." Acting as a backdrop, November manufacturing sector purchasing managers“ survey results in China, the Eurozone and the US all [Mon 15:42]
Lloyds Banking Group on Monday confirmed that Lord Blackwell, who has been a Non-Executive Director of the group since June 2012, will succeed Sir Winfried Bischoff as Chairman with effect from April 3rd 2014, when Sir Winfried is due to retire. [Mon 13:16]
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