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Banks rally as Euro-deal is struck - Latest Market Analysis

Markets began Thursday sceptical about the meeting of Eurozone leaders that was scheduled later in the day. The FTSE gradually lost ground throughout the morning as investors feared that the German and French leaders, Angela Merkel and Nicolas Sarkozy, were worlds apart with regards to their respective plans to assist Greece.

There was however a dramatic uptick in sentiment in response to reports of progress coming out of the meeting in Brussels. There was little clarity in the news flow, but rumours circled that the European Financial Stability Fund (EFSF) would be increased in size, loan maturity would be extended from 7.5 to 15 years, and interest rates cut from their current 5% levels to 3.5%. Importantly, the EFSF would also be given powers to intervene in the secondary bond market in exceptional circumstances suggesting this package may have a greater ability to curtail contagion to core regions.

Battered banks received an uplift on the news, with the UKs Barclays finishing up nearly 8%, followed by Lloyds and RBS both of which gained nearly 6%. Sterling and the euro both gained ground against the dollar, whilst safe heaven bond prices fell as money flowed back into peripheral debt.

Following disappointment on Wednesday during which AstraZeneca’s diabetic drug Dapagliflozin was rejected by the FDA, Thursday saw the approval of Brilinta, its anti-clotting treatment for heart attacks and cardiovascular deaths. The drug is already approved in 33 countries but with the US representing the largest single market, shares reacted positively and after leading the FTSE earlier in the day finished up 2%.

Locally, Vertu Motors closed down 9.1% at 28.8p as the car dealer said trading in the early part of the year was weaker as a result of the termination of the Government’s scrappage scheme and lower consumer demand.

The FTSE finished the day up 0.8% just shy of the 5900 mark, lagging the CAC 40 and DAX which rebounded more strongly to finish up 1.7% and 1.0% respectively.

This was posted in Bdaily's Members' News section by John Dance .