Market Report: Chancellor's chop good news for RBS
Axe swinging by George Osborne at Royal Bank of Scotland's (RBS) investment banking arm helped it to achieve top spot on the blue-chip index yesterday.
News that the taxpayer-owned bank is offloading its equity derivatives unit and has received interest from rivals helped it soar more than 5 per cent on a day when the wider market also surged over 3 per cent.
RBS, pressured by the Chancellor, said last month it will offload parts of its investment bank in a bid to bolster its balance sheet ready for the sale of the Governments' stake in the bailed out bank.
RBS's plans to focus its markets division on fixed income and get out of its complex trading businesses including structured retail and equity derivatives. The derivitives division was reported to have attracted interest from BNP Paribas, Commerzbank and Société Générale – among others – yesterday and the news pushed its shares up 14.1p to 284.1p.
The FTSE 100 rocketed 3.08 per cent, boosted by a surprise statement from the new Bank of England Governor Mark Carney who more or less ruled out interest rate rises in the medium term. This was joined by a statement from European Central Bank president Mario Draghi who said rates will remain at current or lower levels for an "extended period" to help the recession-hit eurozone economy.
The benchmark index added 191.8 points to 6,421.67 – the biggest daily rise in percentage terms since the end of November 2011. The jump added £48.99bn to the value of the UK's biggest companies, according to the FTSE Group.
Other banks were also gainers boosted by Mr Carney's comments and Standard Chartered advanced 69p to 1,496.5p.
Car and aerospace engineering specialist GKN revved up 14.3p to 322.1p on strong car-sales data in the UK which followed good results from the US recently.
Panmure Gordon's Jean Roche took another look at high street bellwether Marks & Spencer (M&S). She reiterated her buy rating on the retailer for four reasons: its good food division, the potential for turnaround in clothing with new style director Belinda Earl in place, its growing international business and its recent commitment to shareholder returns. M&S was 18.5p better off at 459.8p.
On the mid-tier index, gold miner Centamin shimmered up 4.6p to 35.75p as traders decided the military coup in Egypt could be good news for its pending court case over its licence for the Sukari mine in that country.
Analysts at Peel Hunt said "these developments clearly elevate the political uncertainty surrounding Centamin, and at this stage the implications for the ongoing court case is unknown.
"We remind investors that the ultimate outcome is likely to be a binary one. We remain of the view that this binary outcome will be in Centamin's favour."
Over on Aim, fashion follower David Reynolds at Jefferies put his hands up and admitted that he had got online clothing group Asos all wrong. Mr Reynolds and his team had previously been a seller of the Aim-listed fashion website, giving it an "underperform" rating. He said this was an "ill-judged downgrade" and upgraded the company to buy. The analyst also nearly tripled his price target on the stock, raising it from 2,199p to 6,200p on the grounds of "high-quality senior management", its "massively disruptive business model" and "continuing brand momentum".
Mr Reynolds's new outlook was echoed by investors and Asos picked up 228p to 4,355p. But he sounded one word of warning – he is still concerned about future margins.
Department store chain Beales reported a fall in its pre-tax losses in the first half but the small-cap retailer said conditions remained tough and the stock declined 3.75p to 11.25p.
Enables IT, the network and IT expert, won a £750,000 healthcare contract and it rose 5p to 44.5p.
US-focused oil and gas tiddler Northcote Energy has set up a partnership vehicle for US investors to invest but it closed unmoved at 1.52p.
Zoltav Resources, the listed oil and gas explorer backed by ARA Capital which is run by Chelsea FC owener Roman Abramovich's son Arkadiy, has bought its first Russian oilfield. It has acquired the Koltogor field in Khantiy-Mansisk in western Siberia and it gushed 136.18p – or 1,995 per cent – to 143p.
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