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FTSE gains on earnings optimism

Source: Reuters - Mon 19th Oct 2009

Gains in miners and energy firms pushed the top shares 1.3 percent higher by midday on Monday, underpinned by firmer commodity prices, while investors awaited corporate earnings from the United States for further direction.

At 11:49 a.m., the benchmark FTSE 100 rose 65.36 points at 5,255.60 reversing losses from Friday when the index closed back below the 5,200 level after results from Bank of America and General Electric disappointed markets.

Oil majors were buoyed after crude prices hit a year-high of $79.05 a barrel Monday, having risen for the eighth straight session.

BG Group, BP, Royal Dutch Shell and Tullow Oil all advanced between 0.8 and 1.8 percent.

Mining firms also dominated the gainers list, drawing strength from higher metals prices which rose on the back of a weak U.S. dollar. Fresnillo, Kazakhmys, Anglo American, Vedanta Resources and Xstrata added 3 to 3.7 percent.

The U.S. earnings season is likely to remain the major focus for investors who will be looking for further signs of recovery in global demand.

Apple and Texas Instruments will report quarterly earnings after European markets close Monday.

"Equity markets continue to take their lead from the earnings season. The earnings to come later this evening... will help to dictate whether equity markets can push on further from here" said Joshua Raymond, market strategist at City Index. 

The blue-chip index is up 18.7 percent so far this year and has surged 52 percent since touching a six-year trough in March, but is still 2.9 percent below its level when Lehman Brothers collapsed last September.


Also benefiting from improved risk appetite, banks were broadly higher, with Barclays, HSBC and Standard Chartered up 1.1 to 1.8 percent.

However, the part-nationalised banks missed out, with Lloyds Banking Group down 0.5 percent while Royal Bank of Scotland was flat.

Aviva fell 1.4 percent after the firm said it expects to pocket 1.2 billion euros for future growth after the flotation of Dutch unit Delta Lloyd later this year, with investors concerned by what the insurer might do with the cash.

Telecoms firm Cable & Wireless was also a notable blue chip faller, down 0.7 percent after Citigroup cut its rating on the stock to "hold" from "buy" in a sector review.

Defensive utility firms Centrica, Severn Trent and United Utilities Group shed 0.1 to 0.4 percent.

Among the mid caps, bus and rail group National Express shares jumped 9.1 percent after Stagecoach confirmed it has approached its rival about a possible merger in a deal which was valued by the Sunday Telegraph at 1.65 billion pounds. Stagecoach fell 0.3 percent.

In a sign of improvement in the economy, property Web site Rightmove said house prices in England and Wales rose for the first time in more than a year in October, buoyed by a dearth of properties coming onto the market. 

Meanwhile, the rise in British business failures is set to end early in 2010 as the UK economy returns to growth and financial strain on businesses eases, according to a report from accountants and business advisors BDO.

However, in contrast to the upbeat view on the economy, Monetary Policy Committee member Adam Posen said in a newspaper interview Sunday that the Bank of England must continue its policy of quantitative easing because the financial system has yet to recover fully.

In another negative assessment of the prospects for economic growth, the Ernst & Young ITEM Club's autumn forecast said British GDP growth will struggle to hit 1 percent in 2010, while showing weak growth in the second half of 2009.

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