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The London stock market surged back through the 5200 resistance level today with share prices changing hands at their highest level since 22 September last year.
City investors remain in a positive frame of mind ahead of the important third-quarter reporting season in the US which gets into full swing this week with a clutch of big banks reporting, including JPMorgan, Goldman Sachs and Bank of America. The hope is these results may signal a radical change in the US economy and confirm that the worst of the global recession is over.
London's achievement was made all the more remarkable by the fact that Tokyo is closed today for a national holiday while in New York the bond market will be closed but the stock market remains open.
In Tokyo the Japanese were celebrating National Sports Day, while the Americans were paying homage to Christopher Columbus, a man who struck it rich even though he didn't know, at the time, where he was going. The Federal Reserve will no doubt be hoping it can repeat the achievement when it comes the US economy.
In the event, the FTSE 100 index surged 61.58 to 5223.45, although closer inspection of overall turnover levels suggest this is one rally which has been built on sand. The wider FTSE 250 index sported a rise of 85.30 to 9462.60.
Spread bookie David Buik remains cautious: “The sterling performance of the FTSE 100 over the past seven months has little or no correlation with the rather sedentary performance of the UK economy. The main gains have come from mining, oil and gas, banks, food and beverage, drugs and tobacco — sadly very little to do with infrastructure of life in Old Blighty'.”
Once again, blue chips were led higher by the miners which are pinning their hopes on a global economic recovery designed to raise the price of raw materials. Mexican miner Fresnillo climbed 21p to 837p, while Indian outfit Vedanta Resources added 44p at 2206p, and Kazakhmys put on 21p at 1169p. Anglo-Swiss miner Xstrata rose 18p to 971½p. The deadline for its takeover of Anglo American, up 36p at 2186½p is next week. Xstrata has already indicated it will walk away.
There was also a turnaround in the fortunes of Vodafone, up 3.8p at 136.2p. The mobile phone giant has been targeted by short-sellers during recent days amid fears it has become embroiled in a price war in India — one of its most important markets.
Another boost to the index came from the oil majors as the price of oil rose above $73 a
barrel on world markets. BP responded with a rise
of 7.6p at 550.1p, while Royal Dutch Shell added
23p at 1778p, and BG Group 14p at 1116p.
Oriel Securities says it has begun taking profits among the oil services sector after a strong run. It has a sell rating on Hunting, up 8p at 541½p, and a reduce on Petrofac, down 6½p at 999p. Oriel also takes the view that Tullow Oil, up 9p at 1227p, is starting to look a bit expensive. The price has come up from the 1115p level since the start of the month, supported by rumours of ExxonMobil's expansion in Ghana. Exxon is said to be interested in buying Kosmos Energy's stake in the giant Jubilee oil field in Ghana, which is also one-third owned by Tullow. There is also talk that state-run Ghana National petroleum is also looking to buy Kosmos' stake.
The shenanigans in the ITV boardroom have raised hopes that the television broadcaster will soon attract a bid. This could be one reason Goldman Sachs has raised its rating on the shares from neutral to buy. BSkyB continues to hold almost 19%. ITV rose 1.07p to 47.3p.
Wolfson Microelectronics drifted ¼p to 126¼p in the wake of last week's profits warning. The shares have now drifted off from a year's high of 152p since last month. Citigroup has decided to raise its target from 115p to 135p.
