LONDON (SHARECAST) - - IAG leads Footsie higher; banks, miners follow suit
- ECB expected to act soon
- QE3 hopes in the US drive gains
UK stocks started the week well as risk appetite increased on hopes that European policy-makers will announce measures this week to stem the crisis and the US central bank will act to boost economic growth.
Equity markets have extended gains made last week after European Central Bank (ECB) President Mario Draghi said that the ECB would do "whatever it takes to preserve the euro…and believe me, it will be big enough".
"The ECB president has been reluctant to intervene in the bond markets until now, regularly pointing out that ECB intervention would not solve the fundamental problems. However, with the debt crisis spiralling out of control, it looks like Draghi has finally been persuaded to buy the leaders some more time," said analyst Craig Erlam from Alpari.
Jean-Claude Juncker, the head of the Eurogroup, added to speculation that policy-makers will deal with escalated bond yields in peripheral Eurozone nations like Spain, saying in newspaper interviews this weekend that they have "no time to lose".
The Footsie maintained its upwards momentum throughout the day in spite of a rocky start for stocks Stateside, with investors showing caution ahead of the Federal Reserve's two-day policy meeting tomorrow. Poor labour, manufacturing and GDP data as of late have added to expectations that the Fed will act.
"Both ECB and Fed announcements will be key drivers of price-action in the near term, so we can expect volatility to continue head of the central bank actions later this week," said Ishaq Siddiqi, market strategist at ETX Capital.
FTSE 100: IAG takes off ahead of Friday's results
British Airways owner International Consolidated Airlines Group, otherwise known as IAG, led UK blue chips higher this afternoon as investors hoped that it can follow in the footsteps of European rival Air France by beating forecasts in its results on Friday. Air France surged in Paris today after it reported a better-than-expected second-quarter loss on the back of lower operating costs.
Also providing a lift were financial and mining stocks as risk appetite increased. ENRC, Evraz, Xstrata and Vedanta led resource stocks higher, while banking groups RBS and Lloyds also made gains. Global banking group HSBC was among them after seeing an 11% rise in reported pre-tax profit in the first half to $12.7bn.
Publishing group Pearson was firmly out of favour following Friday's first-half results. Nomura maintained its 'reduce' rating on the stock this morning, saying that organic growth of just 0.6% is "unfeasibly lower" for a 14.4x P/E multiple.
Electricity and gas provider National Grid edged higher after saying it achieved a "solid operational and financial performance" in its first quarter and is keeping its positive outlook for the full year unchanged.
FTSE 250: Fidessa leads fallers after first-half results
Trading systems developer Fidessa was a heavy faller after top line growth was below forecasts in the first half, as falling sales in Europe dampened revenues at the group level. Revenues rose 3% during the six months to June 30th from £137m to £141.3m, short of Peel Hunt's £144m estimate.
Specialised technical products and services provider Diploma followed suit was out of favour after saying that underlying revenue growth was just 5% against a strong prior-year comparative.
High Street bookie Ladbrokes also fell after revealing that its Product Director has been relieved of his executive duties.
FTSE 100 - Risers
International Consolidated Airlines Group SA (CDI) (IAG) 162.00p +7.21%
Evraz (EVR) 241.60p +5.73%
Eurasian Natural Resources Corp. (ENRC) 401.80p +4.47%
Aviva (AV.) 299.00p +4.40%
Vedanta Resources (VED) 928.00p +3.63%
Royal Bank of Scotland Group (RBS) 222.20p +3.59%
Lloyds Banking Group (LLOY) 31.09p +2.93%
Kazakhmys (KAZ) 719.50p +2.93%
Petrofac Ltd. (PFC) 1,503.00p +2.87%
Weir Group (WEIR) 1,704.00p +2.71%