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Markets regain momentum

Cherry Reynard, 02/11/09 17:14

Global stock markets were buoyed by better-than-expected housing and manufacturing data.

Manufacturing data from the US, UK and Eurozone suggested that economies had turned a corner. In the absence of earnings data, markets responded positively. The US markets managed to set aside the problems of CIT, which filed for bankcrupty, and the S&P had risen 1.08% to 1,047 by the time of the UK close. The FTSE 100, which had spent the morning trading between 20 and 30 points up, ended up a decisive 1.19% to 5,105.

The banks were a drag on proceedings. The Royal Bank of Scotland confirmed that it was considering extending its programme of disposals in order to change the terms of its participation in the UK government’s asset protection scheme. This may include trophy assets Directline and Churchill. The group’s Asian retail and commercial operations are already up for sale.

RBS shares fell 7.8% to 38.65p and the rest of the sector followed it down. Lloyds was the other major faller on the day, dropping 2.33% to 85p and is expected to make an announcement on its recapitalisation tomorrow. This is likely to be a crucial week for the sector with Alistair Darling due to update the House of Commons on the current status of the asset protection scheme.

British Airways also had a bad day’s trading, after saying that it had received injunction papers from labor union Unite over its plans to change working practices for cabin crew. The airline was also hit by weak guidance from RyanAir – chief executive Michael O’Leary said that the group would be loss-making in the second half of the year after a drop in average fares.

It was also a bad day for the asset managers. Henderson fell 1.01% to 127.8p, Aberdeen fell 0.91% to 131p on belated fears about the sustainability of the equity market rally.

Resource stocks the main driver behind the market's rise. In fact, 9 of the top 10 gainers on the FTSE 100 were resource stocks. Randgold Resources topped the day’s charts, gaining 5.96% to 4,196p. Lonmin, Kazakhmys and Vedanta were also up.

Yell.com reversed its early gains despite winning support from shareholders to refinance its debt. Shares were down 2.97% to 49.73p, making one of the weakest performers on the FTSE 250.

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