LONDON MARKET CLOSE: Stocks Gain Even As IMF Leaves Greek Debt Talks

LONDON (Alliance News) - UK stocks ended higher Thursday, despite a sharp sell-off late in trading across Europe after the International Monetary Fund said it had left the negotiations over the Greek debt due to "major differences" between the parties.

The FTSE 100 closed up 0.2% at 6,846.74, while the FTSE 250 ended up 0.3% at 18,089.45. The AIM All-Share finished flat at 773.41.

In Europe, the CAC 40 in Paris ended up 0.7% and the DAX 30 in Frankfurt closed up 0.5%, though they gave back almost half of their earlier gains Thursday.

The International Monetary Fund's technical team left bailout talks with Greece in Brussels and returned to Washington with the sides "well away from an agreement", IMF spokesman Gerry Rice said. "There are major differences between us in most key areas," according to Rice. "There has been no progress in narrowing these differences recently."

The IMF spokesman noted the "urgency" of the talks, but he added there is "no real schedule here" for negotiations. "The IMF never leaves the table," Rice said. "We remain engaged, but the ball is very much in Greece's court right now."

IG Markets analyst Chris Beauchamp is surprised that it took so long for hopes of progress to be quashed. "Despite this, most markets are still up on the day, indicating that there is still hope that [German Chancellor] Angela Merkel will be able to bang some heads together."

Meanwhile, European Council President Donald Tusk urged Greece to be more "realistic" in bailout talks with its creditors, warning that time is running out for a deal unlocking badly needed funding. "There is no more time for gambling. The day is coming, I am afraid, that someone says that the game is over," Tusk says, noting that a meeting next week of eurozone finance ministers should be "decisive".

In the US, retail sales showed a notable increase in the month of May, according to a report released by the US Commerce Department. The report said US retail sales jumped by 1.2% in May, matching economists' consensus estimate. It also showed upward revisions to sales in the two previous months, with sales rising by 0.2% in April and by 1.5% in March.

Separately, the US Labor Department said import prices surged by 1.3% in May following a revised 0.2% decrease in April. Economists had expected import prices to climb by about 0.8%. The bigger-than-expected increase in import prices reflected the jump in prices for fuel imports, which soared 11.8% in May after rising by 1.3% in April.

Thursday's positive economic data coming from the US, coupled with last week's surprisingly strong non-farm payrolls, seem to suggest the US economy is starting to improve. As a result, investors will watch next week's Federal Open Market Committee for clues about when the US Federal Reserve will raise US interest rates.

The World Bank on Thursday urged the US central bank to hold off raising rates until the next year, citing the risks it may pose to emerging markets, as the lender lowered its growth expectations for the global economy to 2.8% from the 3.0% estimated in January.

At the European stock market close, Wall Street was higher, with the DJIA up 0.3%, the S&P 500 up 0.2% and the Nasdaq Composite index up 0.1%.

On the London Stock Exchange, shares in Royal Mail and Royal Bank of Scotland Group experienced contrasting fortunes following UK government announcements about its holdings in the two companies.

Royal Mail led FTSE 100 fallers Thursday, down 4.5% at 493.30 pence, after the UK government said it has raised GBP750 million by selling a further 15% stake in the postal operator for 550p a share, significantly more than it got per share when it first floated Royal Mail in a criticized initial public offering nearly two years ago.

Meanwhile, Royal Bank of Scotland Group was amongst the biggest blue-chip gainers, up 1.9%. UK Chancellor George Osborne used his Mansion House speech on Wednesday evening to announce that he will begin selling the UK's 80% stake in RBS, after both the Bank of England and banking group Rothschild recommended that the time has come to initiate the lender's return to full private ownership.

Delivering his annual speech at Mansion House in London on Wednesday, Osborne said that kicking off the sale of the government's stake six years since completing the injection of GBP45.5 billion into the bank is the "right thing" to do.

While Osborne provided details about selling the RBS stake, his speech did not include explicit reference to the UK bank levy, which has been seen to have played a part in HSBC Holdings's decision to review whether to relocate its global headquarters from London. The Chancellor did say that making Britain the "best place" for the headquarters of European and global banks is in the national interest. The levy has been seen to disproportionately affect HSBC and fellow Asia-focused lender Standard Chartered as it is imposed on global, not just UK, balance sheets.

Standard Chartered shares gave back some of the gains they had made Wednesday, ending down 2.2%, while HSBC closed down 0.3%.

International Consolidated Airline Group's EUR1.4 billion takeover bid for Aer Lingus got a boost Thursday, although it could also be delayed for a substantial amount of time, after the UK antitrust regulator made a final order that Ryanair Holdings sell down its stake in the Irish flag carrier.

The Competition and Markets Authority said Ryanair must now sell its 29.8% stake in Aer Lingus down to 5%, after deciding that IAG's bid for Aer Lingus hadn't changed the circumstances of its initial ruling that Ryanair must sell down the stake, as Rynair had argued.

The final ruling should mark the culmination of a two-year battle between the regulator and Ryanair, which built up its stake when it tried to acquire Aer Lingus itself. It was blocked by regulators and failed to get the acceptance of the Irish government, which has a 25% Aer Lingus stake. The Irish government has accepted IAG's offer for Aer Lingus.

However, the battle with the UK regulator has become a matter of pride for Ireland's Ryanair and its forthright Chief Executive Michael O'Leary, who said the airline will be appealing the CMA's "ridiculous" and "manifestly wrong" decision that "flies in the face" of the current IAG takeover offer for Aer Lingus. That appeal could delay the outcome of IAG's bid.

Aer Lingus shares closed off 0.2% and IAG shares down 0.6%, while Ryanair rose 0.9%.

In a light economic calendar Friday, eurozone industrial production is due at 1000 BST. In the US, producer price index is due at 1330 BST, while Reuters/Michigan consumer sentiment index is due at 1500 BST.

In the UK corporate calendar, Ted Baker issues an interim management statement, while Sthree releases a trading update.

By Daniel Ruiz; danielruiz@alliancenews.com

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