The markets continued to firm up last night, with the blue-chip FTSE 100 index notching its seventh consecutive session of gains.
The benchmark was 15.97 points higher at 5,253.89 – registering its most successful winning streak since July last year – while the mid-cap FTSE 250 index was broadly flat at 9,863.80, up 3.85p. Sentiment was underpinned by news of strong demand for Spanish government bonds, with the country's Treasury successfully issuing 10- and 30-year debt, despite paying higher average yields. The auctions lead to a narrowing of the spread between Spanish and benchmark German bunds, helping calm nerves across the financial markets and driving the FTSE 100 to an session high of 5,293.76.
The strength was tempered by news from the US, where a raft of negative economic data raised worries about the sustainability of the recovery. Confirmation of a rise in new jobless claims, a record decline in consumer prices, and a slowdown in the pace of factory activity in the mid-Atlantic region triggered early losses on Wall Street, which in turn weighed on the mood in London.
BP was the standout riser of the day, gaining nearly 7 per cent, or 22.7p, to 359.7p as chief executive Tony Hayward prepared to testify before American lawmakers. The oil giant's decision to suspend dividends, sell a chunk of assets, cut capital expenditure plans and set up a $20bn fund to deal with claims connected to the Gulf of Mexico spill was seen as a watershed of sorts, with traders saying that the certainty offered by the moves should lure investors. Analysts also weighed in, with Evolution saying that while the actions didn't cap BP liabilities, or cover fines and penalties, they did "clarify how BP will settle legitimate claims and clean-up costs".
The relief was tempered by news that Bank of America Merrill Lynch, which has been staunchly reiterating its positive view on BP's shares in recent weeks, had switched its stance to "neutral" from "buy". "Whilst we still believe that the asset base is ultimately deep enough to help BP weather the storm, we believe that the measures taken... will materially erode BP's competitive advantage versus peers for the foreseeable future," the broker said, scaling back its target for the stock to 400p from 575p.
Elsewhere, the banks were unfazed by the Chancellor's confirmation of a major shake-up of the regulatory landscape. Speaking overnight, George Osborne unveiled plans to give more powers to the Bank of England. The changes were widely trailed, and had little impact on the likes of Royal Bank of Scotland , up 3.4 per cent, or 1.53p, at 46.7p, Lloyds, up 1.56p at 57.19p, and Barclays, which was 7.8p higher at 312.65p despite UBS scaling back its target for the stock to 380p from 426p.
Also on the upside, the platinum refiner Johnson Matthey, up 38p at 1,610p, and the consumer goods giant Reckitt Benckiser, up 45p at 3,324p, were driven up on the back of some positive broker comment. The former was boosted by Deutsche Bank, which turned positive, urging investors to buy in on the prospect of higher earnings as emissions norms are tightened. "Recent underperformance means the step-up in growth can be accessed through more reasonable multiples," the broker said, raising its target for the stock to 1,900p from 1,550p.
Reckitt was supported by RBS, which said that while the shares had been held back by uncertainty surrounding the company's key Suboxone heroin substitute drug, the treatment was "yet to see any generic competitor". "Each month without a generic adds about 1.5 per cent to earnings, hence the profit and cashflow benefit here is very significant," the broker explained, moving the stock to "buy".
On the downside, Petrofac was 33p behind at 1,254p after Nomura issued a warning on the oil services group's valuation. "Although we remain positive on the long-term fundamentals, we believe the company's robust track record and growth prospects vis-à-vis its oil services peers are now close to being reflected," the broker said, revising its view to "neutral" from "buy", albeit with a new 1,300p target price, compared to 1,240p previously.
On the second tier, the transport group Stagecoach was marked up by 4.6p to 190.8p as investors welcomed news of a partial victory in a subsidy dispute with Government, with the arbitrator in the South West Trains case ruling in favour of the company on the issue of the timing of the commencement of revenue support, but against it on the question of inclusion of car park revenues. In response, KBC Peel Hunt, while reducing its forecasts by 5 per cent to reflect the decision on car park revenues, reiterated its "buy" view.
Also on the upside, the newspaper publisher Trinity Mirror was firm, adding 1.15p to 87.9p on its penultimate day on the FTSE 250. The stock will lose its berth when the changes of the recent index reshuffle are implemented after the close tonight. HMV, which was 0.25p ahead at 57.4p last night, is among the other leavers, while Thomas Cook, which was 2p lower at 203.5p, and London Stock Exchange, which was flat at 639.5p, are among the stocks set to join the mid-cap index.Reuse content