FTSE adds 2.6% on writedown relief rally
Michael Taylor
Reuters
London, U.K.
Tuesday, 1 April 2008, 4:27PM WET
Britain's top share index ended sharply higher on Tuesday, entering the second quarter in buoyant mood as financials jumped on hopes that European bank writedowns signalled that the worst was over for the sector.
The FTSE 100 ended up 2.6%, or 150.5 points, at 5,852.6.
European heavyweight banks UBS and Deutsche Bank both gained after taking big hits on their risky assets -- $19 billion for UBS and $3.9 billion for Deutsche -- which gave their British counterparts a fillip.
Barclays, HBOS, Royal Bank of Scotland and Alliance & Leicester all jumped between 6 and 8%.
"It's certainly been a bumper start to the month and the quarter for equities," said Jimmy Yates, a dealer at CMC Markets. "A lot of positive sentiment is coming out from the fact UBS's new credit writedown is widely hoped to be drawing a line under the recent troubles in the U.S. housing market."
In the previous session, the UK index sealed its worst quarterly performance in more than five years, declining 11.7% in the first three months.
"An equally bullish start on Wall Street after the release of some slightly stronger-than-expected economic data is helping lock in gains," added CMC's Yates.
Across the Atlantic, U.S. stocks rallied after Lehman Brothers helped restore confidence in financials after it said it raised $4 billion in a convertible preferred stock offering to bolster its balance sheet.
The Institute for Supply Management said its manufacturing index for March was stronger than forecast.
The gauge rose to 48.6 in March from 48.3 in February and was closer than expected to the 50 mark, above which signals expansion.
Astra Boost
Pharmaceuticals notched up strong gains, with AstraZeneca advancing 6.9% after two brokerages hiked sales forecasts for the Anglo-Swedish group's Crestor drug, which is emerging as a potential big winner in the fiercely competitive anti-cholesterol market.
JPMorgan upgraded the group to "neutral" from "underweight".
GlaxoSmithKline tacked on 4.6%.
Retail stocks also climbed, with Kingfisher up 7.8%, Next adding 6.8%, and Home Retail Group 7.5% higher, as traders cited short-squeezing.
"It's short-squeezing for the whole retail sector. UBS spooked a few quick-money boys this morning. The retail sector has been one of the sectors where people have been running short," said a trader.
Shares in Friends Provident surged 7.4% on hopes of more bid approaches, extending gains from the previous session when it rejected a bid offer from U.S. private equity firm JC Flowers.
Among midcaps, gambling companies featured among gainers, with both PartyGaming and Rank up 8.4 and 9.9%, respectively, as traders cited persistent bid talk after earlier newspaper reports.
Malaysia-based gaming group Genting, which has a significant stake in British casino, bingo and online betting company Rank, has again been mentioned as a possible suitor for Rank, traders say. Rank and representatives for Genting in London declined to comment.
On the downside, miners lost ground as precious and base metal prices fell. Antofagasta shed 1.5%, Lonmin dipped 2.4%, and Xstrata dropped 1.5%.
U.S. crude CLc1 dipped below $100 a barrel, extending losses from the previous session as a strengthening U.S. dollar triggered a wide sell-off across commodity markets.
BP was flat, and BG Group was 2% lower.