The FTSE 100 bounced back on Friday morning after finishing Thursday down 33.76 points at 6007.37. Fears over eurozone governmental debt have ebbed away and strong commodity prices have helped the major miners and the oil majors make gains.
At 12.10 pm (London time) the FTSE 100 stands 50 points up at 6058.27.
Spot gold and silver hit $1466.40 and $40 an ounce respectively as investors took advantage of a weaker dollar and looked for a haven and a hedge against rising inflation. Brent crude reached a two and half year high of $123.93 a barrel and copper was 1.4% higher.
For this morning at least, it seems investors are choosing to enjoy the underlying plot of economic growth, especially in the US, and not the negative story of rising prices.
Earlier this week…
After climbing past the 6000 mark on Friday, a quiet start to the week for the FTSE 100 saw the miners help the UK’s leading index make small gains on Monday, it finished up by 0.1% to 6016.98. Strong silver prices helped Fresnillo add 2.9% but gains were checked by the banks led by RBS which lost 1.2%.
The FTSE 100 lost ground Tuesday, ending up down 9.92 points at 6007.06. Miners struggled after China’s interest rate hike of 25 basis points, which took the one year lending and deposit rates to 3.25% and 6.31% respectively, re-ignited fears of a slowdown in demand for metals. And again the banks were in difficulty after the downgrade of Portugal by Moody’s.
The FTSE bounced back Wednesday adding 34.07 points to finish at 6041.13. Lloyds led the climb higher as banks were in favour again. The Portuguese bailout wasn’t announced until after the UK market closed.
Portugal asks for a bailout; Spain’s unemployment rate rises; ECB lifts interest rates
As yields on 12 month Portuguese bonds rose to 5.9% from 4.3% previously and after months of speculation Portugal became the third eurozone country to ask for a bailout from the European Commission on Wednesday. A day before, Moody’s had downgraded Portugal’s government debt to Baa1 from A3.
‘I tried everything but we came to a moment that not taking this decision would bring risks we can't afford,’ admitted the soon-to-depart Prime Minister Jose Socrates.
The bailout is likely to cost around €70 billion with a bridging loan of €15 billion likely.
With the number of people filing for unemployment in Spain jumping by 34,406 to a new record of 4.3 million on Monday and Portugal’s subsequent bailout analysts felt compelled to ruminate a potential bailout of Spain. The latest unemployment figures serving as a reminder that Spain still has a tough fight on its hands despite posting a 0.2% expansion in GDP in the fourth quarter.
The European Central Bank (ECB) raised interest rates for the first time since 2008 on Thursday from 1% to 1.25%.
‘The adjustment of the current very accommodative monetary policy stance is warranted in the light of upside risks to price stability that we have identified in our economic analysis,’ said the statement by ECB president Jean-Claude Trichet.
UK construction PMI lower, services PMI at record high; no change for UK interest rates
The purchasing managers index (PMI) for construction came in at 56.4 in March just a touch lower than February’s eight month high of 56.5. The PMI for services, the UK’s largest sector, rose to 57.1 from 52.6 which was close to the highest it’s been since the start of the economic crisis. Analysts were quick to point to a spurt in government spending prior to the cuts kicking in as a crucial but short-term factor.
On Thursday the Bank of England’s Monetary Policy Committee voted to keep interest rates at their current record low of 0.5%.
Latest FOMC minutes reveal a range of opinions, US initial jobless claims fall
Minutes from the latest Federal Open Market Committee meeting revealed that while many different opinions were voiced about how monetary policy should develop throughout 2011 and beyond members were unanimous in voting to hold interest rates and to continue with the asset purchasing plan for the moment. The US economy continues to grow at a moderate pace the report said.
Applications for jobless benefits in the week ended April 2 fell by a better-than-expected 10,000 to 382,000. Further evidence, after the decent non-farm figures, that the US labour market is improving.
