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Stock-market bears were continuing to feel the squeeze today as they rushed to cover any remaining open short positions following yesterday's announcement of a $1 trillion rescue package for America's banks.
Shortages of stock have made their task that much more difficult, as witnessed by some of the weird and wonderful price movements recorded in the past 24 hours. Leading shares managed to extend their charge today, the FTSE 100 index rising a further 14.59 points to 3967.4. That stretched its gains in the past two days to 125 points.
Financial stocks again led the way with Royal Bank of Scotland adding 2.3p at 27.3p while Barclays put on 9.4p at 130.9p and Lloyds Banking Group 3.1p at 64.6p. HSBC was the exception, losing 10¾p at 407p having gone ex the banking giant's £12.5 billion rights issue in London.
Mining shares came of the boil in the wake of yesterday's gains inspired by evidence of an increase in demand for imports by China. Randgold fell 91p to 3556p, Rio Tinto 44p to 2248p and Xstrata 9p to 465¾p.
Centrica, which is offering 725p a share for Venture Production in which it owns a 22% stake, firmed ½p to 243½p despite Citigroup trimming its target from 285p to 265p to reflect a weaker short-term profit outlook as underlined by full-year results for 2008. It has also cut its earnings per share forecast for the current year from 22.1p to 20.8p, because of lower tax after a small contribution from its highly taxed upstream business.
UBS has raised Northern Foods from neutral to buy with a target of 61p ahead of Thursday's fourth-quarter trading update. The broker complains that the environment remains challenging, but management was confident about the outcome for the full year when it last gave an update in January. The shares responded with a rise of 3¼p at 42¾p, making them one of the best performers among second-liners.
UBS has become the latest broker to join the SIG fan club in the wake of the group's rights issue to raise £341 million. It has raised the shares, up 5¾p to 116½p, from sell to neutral, and claims the risk to a breach of covenants has now been removed. It has a price target of 107p.
Good news for shareholders of Inchcape, who have been asked to stump up cash for the troubled motor dealer. Its shares rose 2p to 70p after Citigroup moved from hold to buy. That compares with the terms of the heavily discounted right issue being offered at 6p a share. Citigroup has also upped its target from 40p to 88p.
The US Treasury's latest rescue plan was given the thumbs-up by New York investors, who chased share prices to their biggest one-day rise since October. The move is a massive gamble but has been accepted by many as the only way forward. The Dow ended up 497.48 points, or 7%, at 7775.86.
Banks again led the way, with Citigroup up almost 20% at $3.13, Bank of America 26% at $7.80 and Wells Fargo 24% at $17.33. Insurers were also marked higher, Prudential climbing 26.5% to $21.11 and Lincoln National 32.7% to $9.70. Meanwhile, builders benefited from a surprise jump in new housing starts.
The New York spending spree spilled over into Asia. Tokyo blue-chips soared 3.3% to a 2½-month closing high as Mitsubishi UFJ Financial Group and other banks responded to news of latest US rescue plan. A weaker yen boosted exporters. The Nikkei 225 Average finished up 272.77 points at 8,488.30.
HSBC led the charge in Hong Kong as it joined the global rally in bank stocks. But shares gave up early highs as investors locked in gains, offloading yesterday's best performers, including Chinese bank stocks and metal counters, following the best one-day gain on the main index since December.
HSBC climbed 12.6% as speculators piled into its nil-paid rights, which began trading in Hong Kong yesterday. The Hang Seng index closed up 462.92 points at 13,910.34.
