FTSE closes higher on positive eurozone sentiment
Investors shrugged off a gloomy autumn statement from Chancellor George Osborne today as optimism over a solution to the eurozone debt crisis pushed the London market higher.
The FTSE 100 Index closed 24.2 points higher at 5337 despite Mr Osborne being forced to acknowledge a grim picture of declining growth and soaring borrowing requirements.
Traders were encouraged by a stronger-than-than expected response at a closely watched Italian debt auction, where €8bn euros worth of bonds of varying maturities were sold.
However, troubles in the eurozone clearly remained as the yield on Italian 10-year bonds hit a euro-era high of 7.89%, firmly embedded in unsustainable levels, while reports suggested Standard & Poor’s could soon downgrade France’s credit rating.
Meanwhile, finance ministers were meeting in Brussels to thrash out the details of a plan to bolster the region’s bailout fund at a time when there are fears the likes of Italy and Spain will need rescuing.
The pound was up against the euro at 1.17 as fears over the single currency persisted and was also higher against the US dollar at 1.56.
Banks continued to drag on the wider market as fears over the eurozone were compounded by the Chancellor’s announcement to lift the bank levy for the third time this year after admitting it would not raise its annual £2.5 billion target.
Lloyds Banking Group was 0.5p lower at 23.2p, although insurer Prudential bucked the trend in the financial sector by gaining 12.5p to 610.5p.
International Airlines Group, which operates as British Airways and Iberia, fell 1% – or 0.6p to 145.2p – after it emerged that American Airlines had filed for bankruptcy protection in the United States. BA has a code-sharing agreement with the US airline but said it welcomed the steps being taken by American.
In a quiet session for corporate results, Topps Tiles staged a fightback after its share price fell on news that like-for-like sales declined 6.9% in the seven weeks since the end of September, having been down 2% over the previous financial year.
But shares pulled back into the black to stand 2% higher or 0.5p at 23.5p as analysts including David Jeary at Investec Securities opted to leave their 2012 forecasts unchanged.
There was also a poor response to an update from toy distributor Character, which reduced its sales forecasts for its current financial year to August but said it hoped a range of toys set to be launched over the next few months, including colourful crab XiaXia, will help it outperform the toys market. Shares were off 7.5p at 150p.
The biggest Footsie risers were Randgold Resources up 360p at 6600p, Man Group ahead 5.7p at 138p, GKN up 7.4p at 184.5p and Aggreko ahead 65p at 1841p.
The biggest Footsie fallers were Lloyds Banking Group down 0.5p at 23.2p, Kingfisher off 2.9p at 250.1p, Glencore down 4.3p at 380.1p and Royal Bank of Scotland off 0.2p at 19.5p.
