LONDON MARKET CLOSE: Stocks Up Amid Broad Rally In Europe, US

LONDON (Alliance News) - London's stock indices ended higher Wednesday as equity markets across Europe and the US took back some of their recent losses, with sentiment helped by growing hopes that Greece and its creditors might be closer to an agreement on the country's debt.

Just before the European stock markets closed, Bloomberg quoted two people familiar with Germany's position saying that Chancellor Angela Merkel’s government may be satisfied with Greece committing to at least one economic reform sought by creditors to open the door to bailout funds.

Greek Prime Minister Alexis Tsipras will meet Wednesday evening with Merkel and French President Francois Hollande at a summit of EU leaders and their counterparts from Latin America and the Caribbean.

The FTSE 100 ended up 1.1% at 6,830.27, having closed lower in the past four sessions. The FTSE 250 finished up 1.1% at 18,030.13, while the AIM All-Share closed up 0.1% at 773.73.

European major indices performed even better, with the CAC 40 in Paris up 1.8% and the DAX 30 in Frankfurt up 2.4%.

When the European stock markets closed, Wall Street was higher, with the DJIA up 1.4%, the S&P 500 up 1.2% and the Nasdaq Composite up 1.2%.

Recent volatility in the European bond market eased slightly Wednesday, although the sell-off that has also weighed on equity markets in recent days continued. The yield on the German 10-year bond has risen back above 1% for the first time since September. Still, equity markets shrugged off the move.

The improvement in investor sentiment towards riskier assets like equities also helped the pound, as the dollar dropped against other major currencies. Sterling was trading at USD1.5515 when the London equity markets closed.

In London, Standard Chartered was one of the best-performing stocks in the FTSE 100, closing up 4.0%, amid hopes that UK Chancellor George Osborne will set out plans to phase out the current GBP3.5 billion bank levy when he delivers his annual Mansion House speech on Wednesday evening.

The new tax would apply only to banks' assets in the UK, unlike the bank levy, which is imposed on global balance sheets. That would help HSBC Holdings and Standard Chartered, both of which conduct the bulk of their business outside the UK.

Standard Chartered's new chief executive, Bill Winters, also wrote a letter to employees to mark his first day in the role, saying the bank's capital strength is his top priority.

"Capital strength is a competitive advantage, especially in tough economic times. We are reviewing all aspects of our capital strength as part of our broader business review," Winters wrote in a letter seen by Alliance News. "We need to reinforce our foundations; streamline our business; strengthen our financial position; and re-orient the bank for better returns on our capital," the letter said.

Food retailers were amongst the best blue-chip performers, even though J Sainsbury reported a drop in retail sales and a sixth consecutive quarter of declining like-for-like sales in the first quarter of its financial year, as it continues to be hit by food-price deflation amid a highly competitive UK grocery market.

The supermarket chain admitted that it is difficult to establish when sales will return to growth although its chief executive said he is encouraged by the "early trends" it is seeing.

The 2.1% like-for-like sales decline excluding fuel was slightly ahead of the 2.2% consensus estimate, according to Brewin Dolphin.

Sainsbury's ended up 4.6%, Wm Morrison Supermarkets up 5.0% and Tesco up 4.0%.

Oil related stocks were also higher as Brent oil prices rose to USD65.19 while West Texas Intermediate rose to USD60.68. Royal Dutch Shell 'A' and 'B' shares were up 0.6% and 1.5%, respectively, while BG Group closed up 0.8%. In the FTSE 250, Tullow Oil was up 5.1% and Premier Oil ended up 1.9%.

The US Energy Information Administration said US crude oil inventories dropped 6.8 million barrels in the week ended June 5, while analysts expected a decline of 1.7 million barrels.

Miners were also buoyed, reversing some of their recent losses, after the People's Bank of China sharply cut its inflation projection for the year and lowered its growth forecast slightly as it expects government stimulus measures to underpin growth. It lowered the inflation forecast to 1.4% from 2.2% previously and the growth expectation to 7% from 7.1%.

"This adds to this week's poor trade and inflation data and bolsters the argument that more stimulus will be forthcoming from Beijing," said Mike van Dulken, head of research at Accendo Markets.

Anglo American, up 2.3%, Fresnillo, up 3.2%, and Rio Tinto, up 2.2%, were amongst the best blue-chip performers, while in the FTSE 250 Vedanta Resources and Acacia Mining ended up 4.1% and 4.6%, respectively.

In the economic calendar Wednesday, China retail sales are due at 0630 BST. In the US, retail sales and initial jobless claims are due at 1330 BST.

In the corporate calendar, Home Retail Group issues a first-quarter interim management statement while PZ Cussons issues a trading update. WS Atkins, Halma, Hardy Oil and Gas, Mulberry Group, Real Estate Credit Investments PCC and Volex release full year results.

By Daniel Ruiz; danielruiz@alliancenews.com

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