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Shares on the London stock market surged to their highest level in 10 months today amid signs that the worst of the banking crisis may be over and that even the global economy was starting to look in better shape.
The high-flying FTSE 100 index shows few signs of running out of steam with the benchmark indicator climbing a further 72.2 to 4680.5, its highest level since 3 October. The wider FTSE 250 index surged 148.26 to 8148.22 in a market short of stock.
Investors needed a bit of time to digest the second-quarter results from Barclays, which were in line with expectations thanks to its brilliant acquisition of part of Lehman Brothers operations, after which they chased the share price 19.9p higher to 322.3p. HSBC managed to exceed expectations and was rewarded with a rise of 35.2p at 640.9p. Lloyds Banking Group, up 1.8p at 86.82p, and Royal Bank of Scotland, 2.3p firmer at 47.1p, both report on Wednesday.
The charge was also underpinned by the miners, which were buoyed by firmer raw materials prices, leading to suggestions the world economy is showing signs of revival. Randgold surged 198p to 3833p, closely followed by Rio Tinto, 113½p to 2602½p, and Anglo American, 83p to 2013p. Copper miner Kazakhmys sported a rise of 77p at 933½p. Deutsche Bank has raised its target from 675p to 769p.
But there were casualties, particularly among booze, fags and household products as investors switched out of defensive stocks and back into cyclicals. Imperial Tobacco fell 38p to 1673p, British American Tobacco 25p at 1833p, and brewer SABMiller 30p at 1357p. There were also losses for the Flora margarine and Persil detergent supplier Unilever, 23p to 1557p, and Reckitt Benckiser, of Veet and Airwick fame,12p to 2864p.
Goldman Sachs appears to be doing a bit of catching up among the food retailers, which have been carried higher by the recent stock-market rally because of their defensive qualities and benefit from food price inflation.
It has raised its target price for Tesco, 0.7p cheaper at 366.8p, from 344p to 440p. The broker, also dubbed Golden Sachs because of its money-making abilities, has raised William Morrison, 1.8p lighter at 267.8p, from 275p to 337p and J Sainsbury, 4.2p lower at 313.3p, from 272p to 367p.
Recent trading updates from the big supermarket chains have made favourable reading despite the pressure of relentless competition.
AstraZeneca dipped 4½p to 2798½p after receiving approval for Onglyza for the treatment of type 2 diabetes mellitus in adults from the US Food and Drug Administration. AZ has developed Onglyza with Bristol-Myers. UBS has raised its target for AZ from 3350p to 3500p with a buy rating.
Oil services supplier Petrofac jumped 73½p to 824½p on the back of a big upgrade by UBS of its shares. The broker has raised its rating from neutral to buy and jacked up its target from 640p to 1000p. The move also had a favourable impact on other companies in the service sector.
Gulf Keystone Petroleum, the oil and gas explorer with assets in the Kurdistan region of Iraq and Algeria, has raised £6.8 million by way of a placing of 75.6 million new shares at 9p. The shares were placed by Equest Partners with new and existing institutional shareholders. The money will be used to fund ongoing exploration and drilling at the Shaikan-1 well in the Kurdistan region of Iraq and the Bijeel-1 well on the Akri-bijeel block, in which it has a 20% stake. The shares firmed ½p to 12½p. Last week they were driven higher by talk of a bid from the Indian Oil Corporation which was later denied.
Another company raising money was International Ferro Metals which has raised £22.2 million by way of a placing. The cash will be used to fund the generation of cheaper electricity, used in the manufacture of ferro chrome for use with stainless steel. This will cut its costs by producing around 11% of the group's electricity intake, bringing production back to 100% and generating additional annual income of around £1.4 million from Carbon Credits.
Investors were taking profits in takeover favourite Topps Tiles, 2¼p off at 84¾p, despite HSBC upgrading its rating from neutral to overweight. A series of profit warnings saw the shares start the year at a record low of 19p, which revived speculation it might soon find itself the target of a bid from the likes of Lord Harris's Carpetright.
