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.??
The London Stock Exchange is considering buying a stake in Istanbul's fast-growing stock market as part of a deal that could see Turkish trades settled in the City. Borsa Istanbul has been seeking an international partner to overhaul its technology and improve the market's access to foreign investors for several months. The LSE's proposal would see Borsa Istanbul start to clear its trades through LCH Clearnet, the financial plumbing system now majority-controlled by the LSE. [Yesterday 17:41]
An improved outlook from the Bank of England (BoE) lifted UK markets into the blue by Wednesday lunchtime as investors shrugged off disappointing growth figures from the Eurozone and rising unemployment at home. [Wed 11:19]
Worse-than-expected growth figures from Eurozone powerhouses Germany and France dampened market sentiment in London on Wednesday morning, as stocks pulled back after hitting fresh multiyear highs the day before. [Wed 08:39]
City sources predict the FTSE 100 will open up five points from yesterday's close of 6,686, likely to be driven in part by utilities giant Severn Trent, which has this morning brushed off a bid approach from a consortium of foreign investors, saying it completely undervalues the firm. [Wed 07:29]
Icap is fighting to restructure and survive. Hence the very positive market reaction on Tuesday when it announced that it would beat its target for cost savings. Far more important even, traders breathed a sigh of relief that it did not cut its dividend payment. Nevertheless, a 12 per cent revenue decline alongside pre-tax profits off by 20 per cent at 284m pounds shows how difficult it is to align costs with declining markets. In addition, there are pending regulatory change [Wed 07:19]
Severn Trent topped the leaderboard after it confirmed press speculation that it has received a bid approach from a consortium of investors, which is rumoured to value the UK utility company around 5.3bn pounds. In a statement released this morning, Severn Trent said it had received an approach with a view to making a proposal from Canadian infrastructure investor Borealis, the Kuwait Investment Office and Universities Superannuation Scheme. [Tue 14:57]
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