UK Market News

Monday August 3, 12:28 PM
Glance-FTSE hits new high for 2009 as banks surge

By Harpreet Bhal LONDON, Aug 3 (Reuters) - Britain's blue chip shares hit a new high for the year in midday trade on Monday, as gains in Barclays (LSE: BARC.L - news) and HSBC (LSE: HSBA.L - news) led a rally in the banking sector, while rising commodity prices pushed miners and oil majors higher. By 1059 GMT the FTSE 100 was up 1.5 percent or 69.32 points at 4,677.68, easing off a peak of 4,693.06, its highest since early October 2008. The index is up over 32 percent since hitting a closing low for 2009 on March 9 and last week put in its best weekly performance since April 2003. Banks provided the biggest boost for blue chips as investors welcomed first-half numbers from HSBC and Barclays 'There is a big sigh of relief. The banks are doing very well,' said Philip Lawlor, chief portfolio strategist at Nomura. 'But we have to ask what return on equity do we think these guys are going to be allowed to deliver. Ultimately that dictates the valuation the market will put on them. That debate isn't being fully had at the moment but it won't be long before we transition to that,' he said. HSBC rose 6 percent as it reported a pretax profit for the six months to the end of June of $5.02 billion, down from $10.2 billion a year earlier but just ahead of an average forecast from 11 analysts polled by Reuters. Barclays added 7.3 points even as it fell short of expectations with an 8 percent rise in half-year profit, as bad debts almost doubled to offset buoyant earnings from its enlarged investment bank. 'Barclays' numbers came in below estimates but they have to be put in perspective. They're better than last year,' said Keith Bowman, analyst at Hargreaves Lansdown. BANKING SECTOR Within the sector, Lloyds Banking Group (LSE: LLOY.L - news) , scheduled to release its figures on Wednesday, firmed 1.1 percent, while Royal Bank of Scotland (LSE: RBS.L - news) , which reports on Friday, added 5.6 percent. Standard Chartered (LSE: STAN.L - news) was up 2.3 percent. Gains in HSBC and Barclays also helped push sterling to its highest level since mid-October at $1.6880, with the currency also gaining strength from brighter British manufacturing data. Miners were stronger as metals prices rallied with copper hitting a 10-month high. Randgold Resources (LSE: RRS.L - news) , Xstrata (LSE: XTA.L - news) , BHP Billiton (LSE: BLT.L - news) , Lonmin Kazakhmys, Rio Tinto (LSE: RIO.L - news) , Anglo American (LSE: AAL.L - news) and Vedanta Resources (LSE: VED.L - news) were up between 3.2 and 9.5 percent. Energy majors firmed as crude prices climbed above $70 a barrel, following signs in China that pointed to further evidence economic recovery was picking up. BG Group (LSE: BG.L - news) , BP, Royal Dutch Shell (Amsterdam: RDSA.AS - news) , Cairn Energy (Virt-X: CNE1.VX - news) and Tullow Oil (LSE: TLW.L - news) were up between 1.1 and 3.6 percent. Oil and gas services firm Petrofac (LSE: PFC.L - news) added 10.2 percent, the top gainer on the FTSE 100, as UBS (Virt-X: UBSN.VX - news) raised its recommendation on the stock to 'buy' from 'neutral'. Defensive tobacco stocks, food producers and utilities were in the doldrums as risk aversion among investors retreated. Imperial Tobacco (LSE: IMT.L - news) declined 2.2 percent, while British American Tobacco fell 0.8 percent, also weighed by an RBS downgrade to 'hold' from 'buy' after recent results. Associated British Foods (LSE: ABF.L - news) , Cadbury (Munich: A0NJP5 - news) and Unilever (LSE: ULVR.L - news) were down between 0.1 and 1 percent, while supermarkets Wm Morrison, J Sainsbury and Tesco (LSE: TSCO.L - news) fell between 0.3 and 1.7 percent. Life insurers were also out of favour. Aviva (LSE: AV.L - news) shed 0.3 percent following reports in the weekend press it may cut its first-half dividend. Legal & General (3166.KL - news) dipped 2.3 percent after the Independent on Sunday said the group is expected to face calls from shareholders to raise cash when it announces its interim results on Tuesday. (Additional reporting by David Brett; Editing by David Holmes) Keywords: MARKETS BRITAIN STOCKS/MIDDAY