Rallying banks haul Britain’s FTSE higher

By Jon Hopkins

LONDON (BestGrowthStock) – Britain’s leading share index ended higher after a choppy session on Wednesday, driven by a recovery in banking stocks on reassuring comments from U.S. peer State Street (STT.N: ) and an easing of stress test fears.

At the close, the FTSE 100 (.FTSE: ) index was 49.82 points higher, or up 1.0 percent, at 5,014.82, its high for the day, having swung back from a session low of 4,891.9.

Banks fueled the blue-chip turnaround, with the sector recovering from earlier falls following an upbeat outlook statement from State Street, and with optimism that impending European stress tests may not be as bad as feared.

Barclays (BARC.L: ) was the top FTSE 100 gainer, up 6.2 percent, while Royal Bank of Scotland (RBS.L: ) added 4.7 percent.

State Street, the world’s second-largest custody bank, forecast its second-quarter operating earnings would beat analysts’ expectations, which reinforced hopes of strong earnings from fellow financials.

U.S. blue chips (.DJI: ) were up 1.5 percent by London’s close, recovering from a late sell-off in the previous session as financials pushed higher, led by State Street.

“We were looking very oversold on everything … and I guess in the absence of any bad news we have had a bit of a spike higher,” said David Morrison, market strategist at GFT Global.

Integrated oil was the best performing FTSE 100 sector, boosted by strong gains from BP (BP.L: ), up 4.8 percent as investors anticipated that potential foreign investors could pay a premium for a stake in the oil major.

BP’s chief executive, Tony Hayward, met with representatives of the Abu Dhabi Investment Authority on Wednesday, a UAE official source said.

BP’s peers also gained, helped by a firmer crude price, with Royal Dutch Shell (RDSa.L: ) and BG Group (BG.L: ) up 0.5 and 1.4 percent, respectively.

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Food retailer J Sainsbury (SBRY.L: ) was also a big blue-chip riser, up 4.9 percent on talk of stake building by 26 percent shareholder and former suitor the Qatar Investment Authority. [ID:nLDE6660HP]

Elsewhere on the high street, Marks & Spencer (MKS.L: ) was the top FTSE 100 faller, down 2.6 percent as it posted a third consecutive rise in underlying quarterly sales but saw its rate of improvement slow a little, and it joined rivals in sounding cautious about the consumer outlook.

M&S was also dented by a downbeat note from RBS, which initiated coverage on the stock with a “sell” rating.

Clothing retail peer Next (NXT.L: ) lost 0.1 percent, with RBS starting coverage on it with a “hold.”

And luxury goods group Burberry (BRBY.L: ) shed 1.4 percent as JPMorgan Cazenove trimmed estimates in a preview of an upcoming trading statement, and with the stock trading ex-dividend.

Vedanta Resources (VED.L: ) and British Land (BLND.L: ) also traded ex-dividend on Wednesday.

Pharmaceutical stocks were the biggest drag on the FTSE 100 index, with the sector’s defensive attractions out of favor as investor’s risk appetite returned, with AstraZeneca (AZN.L: ) the worst off, down 0.8 percent.

(Editing by Simon Jessop)

Rallying banks haul Britain’s FTSE higher