World markets make solid gains

Upbeat retail sales figures in the US outweighed concerns over Spain’s creaking finances today as world markets continued to make solid gains.

Upbeat retail sales figures in the US outweighed concerns over Spain’s creaking finances today as world markets continued to make solid gains.

Wall Street’s Dow Jones Industrial Average was 0.7% higher after the US Commerce Department said retail sales rose 0.8% in March, against expectations of a 0.3% rise.

The FTSE 100 Index was 37 points higher at 5690 despite a poor run for British banks, which were hit by ongoing fears over the health of Spain’s economy.

Heavily weighted commodity-based stocks were aided by an upbeat note from Citigroup with Rio Tinto adding 19.5p to 3465.6p and Polymetal advanced 15p to 982.5p.

Utility firms also powered ahead, spurred on by the valuation placed on International Power after its directors agreed a £6.4 billion deal for GDF Suez to buy the 30% of the business it does not already own.

International Power was 3% or 12.95p higher at 416.85p after its independent directors agreed to GDF’s 418p a share offer. The price represents a 7% rise on GDF’s previous offer and was higher than many City expectations.

The buy-out price gave a lift to other power firms, with Southern Electric owner SSE up 24p at 1364p and Centrica 5.75p higher at 319.45p.

However, financial stocks continued to come under pressure as Spain’s bond yields moved closer to unsustainable levels and JPMorgan Cazenove downgraded the sector to neutral from overweight.

The broker is worried that funding costs have increased and will hurt the outlook for profitability at a time when there is already great uncertainty.

In line with this, eurozone worries remained at the forefront of investors’ minds after Spain’s bond yields rose above 6% and fuelled fears that the country is slipping towards bail-out territory.

Lloyds was down 3% or 0.8p at 29.2p and Royal Bank of Scotland fell 0.8p to 24.3p, while Barclays dropped 2.3p to 212.5p, even though a note from Investec Securities reinforced its buy rating on the stock.

Other fallers included insurer Aviva, which dropped 5.3p to 300.4p, while Man Group was 3.4p lower at 106.6p.

Other risers included fashion group Burberry, which climbed 23p to 1588p on expectations that sales will be around 20% higher when it posts an update for the second half of its financial year tomorrow.

Outside the top flight, Cairn Energy was the leading stock after a business it is in the process of acquiring announced a significant oil discovery in Norway.

Agora Oil and Gas has a 20% stake in the Skarfjell prospect, which according to preliminary estimates has between 60 million and 180 million barrels of recoverable oil.

Shares in Cairn, which recently dropped out of the FTSE 100 Index, were 3% or 9.8p higher at 329.8p.

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