28/07/10 - 20:30
UK Research Team, IG Group
The FTSE 100 has twice hinted at a positive turn this morning, but by 11am (London time) the index had erased gains and was trading slightly down on the day.
London's blue chips were quick out of the blocks this morning, up 0.6% in the first thirty minutes of trading, only to erase these gains completely over the course of the next hour. By 11am the FTSE was down 17.35 points (-0.32%) at 5348.32, while the broader FTSE 250 had fallen sharply through its opening level to 10031.12, a loss of 75.31 points (-0.75%).
In Europe, the leading continental indices each spiked early with the FTSE 100, but traded relatively flat through mid-morning. At 10.45am (London time) France's CAC 40 was up to 3687.53, up 21.13 points (+0.58%), while the Dax in Germany was trading at 6215.75, up 8.44 points (+0.14).
Banking upgrades and earnings results contributed most to the FTSE this morning, as yesterday's Basel Committee concessions perked up bankers.
More good news followed today as Deutsche Bank upgraded banks for the first time since December 2009. Barclays gained 2.1% early this morning, following Deutsche's decision to upgrade the bank from 'underweight' to 'neutral' but the stock could not sustain its gains and by 10.45am Barclays was up just 1.90p (+0.56%) to 341.45p.
HSBC and RBS fared better, nudging towards the summit of the FTSE leader board with their prices up 1.50% to 676.30p and 1.19% to 50.95p respectively.
Miners flooded the top of the leader board, with all of Xstrata, Anglo American, Vedanta Resources, BHP Billiton and Rio Tinto up between 0.95% and 2.28%.
Positive earnings results for Compass Group – the world's largest catering company reported a growth rate in organic sales of 5.5% in the fiscal third quarter – boosted the FTSE in general, reassuring investors that economic recovery is on track and the general health of the economy is intact.
Also warming investor appetites was news that British Gas made operating profits of £585 million in the first half of 2010, an increase of 98%. This drastic rise was down to the especially cold winter endured in the UK, and comes despite an underlying fall in energy use as customers become more energy-aware and -efficient. British Gas's parent company, Centrica, reported a 65% rise in profit itself.
Yesterday, embattled oil-giant BP announced a record $17 billion loss for the three months to June. Despite this, BP Chairman Carl-Henric Svanberg insisted that the company was in good health, saying, 'There is no worry about our financial position and our ability to get through this. It's of course a tragedy and it has large consequences, but we have no doubt that we will be able to rebuild the company.' [1]
BP's incoming chief executive, Bob Dudley, spoke of the 'smaller and wiser' BP that would emerge from the Gulf of Mexico tragedy. The company announced it would increase its asset sales to $30 billion over the next 18 months.
Source: [1] BBC News (28 July 2010)
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