Lloyds & RBS lead FTSE higher
Having opened broadly flat, the FTSE 100 soon managed to navigate its way into positive territory, approaching a 1% gain although settling closer to 0.5% for most of the day. The performance came at the start of what has been dubbed a “crunch week” for Europe, with Merkel and Sarkozy meeting today ahead of the European summit to be held in Brussels on the 9thDecember. The couple at the heart of the currency bloc were to outline proposals for budget discipline and treaty change. Closer fiscal integration as it is known could nudge ECB chief Mario Draghi into more decisive intervention from the regions central bank, something that would be greatly welcomed by financial markets.
It appeared some concerns were reduced over the weekend following the announcement of a new austerity package by Italy’s Premier Mario Monti on Sunday. The package, which will be presented to parliament today, includes €20 billion worth of spending cuts and tax hikes, with €10 billion of measures aimed at boosting growth. It certainly appeared to resonate with the bond markets, Italy’s ten year bond yield comfortably below 6%. To highlight the speed and degree of this bond’s rally, the ten year was yielding somewhere in the region of 7.4% last week.
A weak Institute of Supply Management non manufacturing Purchasing Managers Index reading was announced in the US early this afternoon. The data showed that the country’s service sector, which employs 90% of the US workforce, slipped to 52 in November, compared with 52.9 in October and below forecasts. The announcement failed to dent confidence, despite some analysts questioning the strength of the global rally in risk assets and highlighting the propensity for previous European meetings to disappoint. The US indices were higher by more than 1% at the time of writing.
The equity buying was largely focused on banking stocks, with other cyclical sectors such as autos and miners also benefiting. The UK’s Lloyds, and RBS led the index higher with respective 6.3% and 5.3% gains, Barclays uncharacteristically left behind ending the day 0.5% higher. The FTSE 100 put on around 16 points, or 0.3%, to close at 5567.
This was posted in Bdaily's Members' News section by John Dance .
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