The FTSE commenced the week in positive territory, thanks to strength in resource shares, house builders and financials.
Energy majors tracked gains in crude oil, which rose to $79 a barrel this morning on optimism over a sustainable US economic recovery and pickup in oil demand.
‘Overall, oil’s looking very positive, reacting to a pretty good stream of new economic data coming out of the US, which is starting to show signs of picking up,’ said Geoff Clear of Australian & New Zealand Banking Group. Crude will be trading ‘at more normalised prices around the $80 mark,’ he said.
Tullow Oil was the sector’s best performing equity, up 2.1% to 1262p, followed by Royal Dutch Shell, which advanced 2% to 1896.5p. Cairn Energy climbed 1.4% to 3058p, while BP edged 1.1% higher to 565.5p.
Stronger metal prices helped miners rise as well this morning, with Fresnillo rallying 3.9% to 855p and Kazakhmys jumping 3.7% to 1304p.
Kazakh miner Eurasian Natural Resources added 1.8% to 952p after the Independent on Sunday newspaper reported that the miner is planning to buy out its founders’ African assets in exchange for increasing its ownership in the company. The paper said the deal is expected to take place in the first quarter of next year.
Hochschild Mining rallied as much as 3.5% to 324p after Bank of America Merrill Lynch raised its recommendation for Peru’s second-largest silver miner to ‘buy’. The bank also raised its long-term gold and silver price estimates.
October gold futures were up by 0.3% to $1053.9 an ounce this morning. Silver, platinum and copper were also higher this morning.
There was an interesting gold article on Bloomberg this morning, essentially stating that gold is trading around 53% below its 1980 inflation adjusted peak of $2,287 ($873 an ounce in nominal terms). ‘Gold is not at any peak,’ said Martin Murenbeeld of DundeeWealth. ‘The world’s money supply has increased and gold hasn’t kept pace,’ he said. ‘We’re now in a period where gold is catching up.’
House builders were in demand following an upbeat report from property website Rightmove, which said that UK house prices were 0.2% higher than a year ago this month. The property website attributed the gain in prices to a shortage of properties available for sale.
Shaftsbury Shares rallied 4.2% to 395.4p, Barratt Developments climbed 2.5% to 255.4p and Hammerson gained 1.3% to 415.5p.
Banks were having a bit of a mixed morning today, with Lloyds Banking Group retreating 2.2% to 91.06p a share on rights-issue talks. Royal Bank of Scotland edged 0.3% lower to 46.86p while Barclays gained 0.8% to 375.35p and HSBC jumped 1.6% to 705.2p.
Elsewhere, telecoms company Cable & Wireless fell 0.7% to 138.1p after Citigroup cut its rating from ‘buy’ to ‘hold’.
Lower down the market, National Express soared 9.2% to 395p after confirming it received a ‘highly preliminary’ proposal from Stagecoach, after talks with CVC ended last week. National Express said it would consider the approach but would also continue to explore plans for an equity issue. Shares in Stagecoach Group fell 0.8% to 155.6p.
There were a few tips from weekend newspapers; The Sunday Times suggests GKN was worth adding to one’s watchlist, while the Sunday Telegraph said Amec was worth buying. The Sunday Mail, meanwhile, gave Talvivaara a buy rating and suggested taking some profits in Halfords.
It’s a quiet day on the macro front, however, it’s worth mentioning that Ernst & Young ITEM Club predicts that UK GDP will growth 1% in 2010, compared with an earlier forecast for 0.5% growth. Meanwhile, BoE policy member Adam Posen told the weekend press that the central bank must continue with its quantitative easing programme because the financial system has yet to recover fully.
By 10.35am (London time) the FTSE 100 was trading 59.32 points (+1.14%) higher at 5249.56 while the broader FTSE 250 was 80.76 points (+0.86%) above its previous close at 9506.96. December Dow and S&P 500 futures were trading around 0.40% higher, suggesting that the market currently expects Wall Street to open in positive territory later today.
