By This Is Money Reporters
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11.50: The Footsie’s earlier gains had evaporated by lunchtime as traders nervously looked ahead to the start of trading today in New York following Friday’s mixed US jobs reports which saw the Dow Jones Industrial Average end lower, although other indices rose.
‘With the markets sliding back after the open, the focus will now be on the US open and any hangover to Friday’s payroll number with markets having had a couple of days to sleep on it, said Toby Morris, Senior Sales Trader at CMC Markets.
The FTSE 100 index was down 2.6 points at 6,737.3, having surrendered earlier gains of around 15 points.
Oils weak: An international deal on Irans nuclear programme deal could eventually pave the way for a lifting of sanctions, bringing Iranian oil back onto the global market.
Falls by the heavyweight energy stocks helped drag the blue chip index lower as crude oil prices fell following an international deal on Iran’s nuclear programme. BG Group shed 7.7p at 1,311.8p, BP lost 4.5p at 492.5p, and Royal Dutch Shell fell 16.5p to 2,173.5p.
But strength in the banking sector continued to help limit the FTSE 100’s mid session decline, with Barclays the top sector performer up 9.0p advance at 292.5p. Banks were encouraged by news that regulators have agreed to ease a new rule reining in banks’ reliance on debt.
Supermarket firm William Morrison remained the biggest individual FTSE 100 gainer, ahead 8.1p at 244.p after reports said that the firm, which last week posted a poor Christmas trading update, is reportedly planning an 800million raid on its property estate.
On the second line, emergency home repairs firm HomeServe saw its shares gain 4.8p to 287.3p despite the Financial Conduct Authority imposing a bigger-than-expected fine on the group following its mis-selling scandal on hopes that it can put the regulatory probe behind it.
Broker Liberum Capital upgraded its rating for Homeserve to ‘buy’ from ‘hold’ on that basis in the wake of the news.
Homeserve has been slapped with a 34.5million fine by the financial watchdog after an 18-month probe. The group said the penalty was higher than it expected and increased its provisioning by 30million to reflect the bigger fine.
Premier Foods was also in demand, up 5.0p to 134.5p on reports that a poker-playing Californian billionaire is poised to buy a slice of the Hovis owner as it courts outside investors to revitalise the bread brand.
Alec Gores, who heads US private equity firm Gores, is reported to be in talks with Premier Foods as the food business struggles to overcome a combined debt mountain and pension deficit of around 1.3billion.
‘While the firm has previously stated it had no desire to sell, any reasonable offer would provide a helping hand to a business in desperate need of investment, struggling to break even in recent years,’ said CMC’s Morris.
10.15: Banks led a modest advance by the Footsie by mid-morning, with the sector encouraged by news that regulators have agreed to ease a new rule reining in banks’ reliance on debt.
Overall, the FTSE 100 was up 12.70 points at 6,752.6 points, edging back towards a two-month intra-day high of 6,769.94 points hit on Friday.
European regulators agreed on Sunday that banks will be able to include derivatives on a net rather than the much bigger gross basis when calculating leverage ratios under the Basel III agreement.
Banks bonus: Banks were higher encouraged by news that regulators have agreed to ease a new rule reining in banks reliance on debt
The easing should help keep the global economy financed as it means banks will not have an incentive to ditch some types of assets, such as loans to companies, in order to meet the leverage targets.
‘This change in guidance around the leverage ratio calculation is likely to be most beneficial for investment banks, in our view, and hence of the quoted UK banks we would expect Barclays’ shares to react most positively to this news,”‘Gary Greenwood, analyst at Shore Capital, said in a note.
Barclays rose 7.5p to 291.1p, Royal Bank of Scotland was up 7.4p to 364.3p, and Lloyds Banking Group added 0.9p to 83.9p.
Retailers were also in the spotlight again, with supermarkets group William Morrison the top blue chip gainer after press reports said that the chain, which last week posted a poor Christmas trading update, is reportedly planning an 800million raid on its property estate as it looks at ways of building up a cash pile that can be returned to investors.
With Morrison’s chief executive Dalton Philips keen to buy time from the City for his turnaround plan, shares recovered from sharp falls last week with a rise of 7.9p to 244.0p.
Elsewhere on the high street, shares in mid cap department store chain Debenhams jumped 4.1p to 85.7p after it emerged that Sports Direct International has taken a near 4.6 per cent stake in order to allow the companies to consider ways of working together.
Shares in blue chip Sports Direct fell 8p to 748p.
Signs of a pick-up in merger and acquisition activity also pepped up investor interest after engineer and project manager Amec announced a potential deal worth 1.9 billion to buy America’s Foster Wheeler.
Amec will offer shares as part of the proposed combination but this was not enough to dampen enthusiasm, with its stock up 15.0p at 1,094.0p.
However, overall gains in the FTSE 100 were tempered by weakness in the heavyweight energy sector as crude oil prices fell after an international deal on Iran’s nuclear programme.
The deal could eventually pave the way for a lifting of sanctions, bringing Iranian oil back onto the global market.
BP was down 3.9p at 493.1p, also impacted by a target price cut from analysts at Barclays. And BP suffered as well following the oil major has failed to persuade a US appeal court to limit the compensation payouts for the Gulf of Mexico Deepwater Horizon oil rig disaster, leaving it exposed to hundreds of millions of dollars, or even billions more in claims.
08.25: The Footsie notched up early modest gains today, carrying over the previous session’s gains in tandem with advances by global markets after a mixed US jobs report on Friday failed to dent enthusiasm over recovery in the world’s biggest economy.
The FTSE 100 index was up 12.7 points in early deals at 6,752.6. The UK blue chip index closed 48.6 higher on Friday as markets put a positive spin on a weather-impacted December US jobs report.
A below-forecast rise in US non-farm payrolls was being seen as an anomaly, and a bigger than expected fall in the US unemployment rate was interpreted as a sign of underlying economic improvement warranting the start last month of a tapering in the Federal Reserve‘s bond-buying stimulus programme.
Jobs hope: The FTSE 100 index extended Friday’s gains after a weather-impacted US jobs report was seen as an anomaly
Mike van Dulken, Head of Research at Accendo Markets: ‘The reaction suggests belief that tapering is unlikely to take place any faster than expected even if the unemployment rate improvement (even closer to Fed threshold) and participation rate deterioration (more dropping out of labour pool, less slack in economy) continue to confound and January’s polar vortex may result in a similar impact to NFP.’
Banks were an early focus ahead of the start this week of the sector reporting season in the US, and after global banking regulators agreed on Sunday to ease the way a new rule, meant to rein in risky balance sheets from 2018, is compiled to try to avoid crimping financing for the world’s economy.
Meanwhile, the number of new financial services jobs in London rose for the first time in almost two years last month, research showed on Monday, which recruiters said was a sign that banks are starting to think about growth after years of restructuring.
Stocks to watch include:
SPORTS DIRECT: Britain’s largest sporting goods retailer has acquired a 4.6 per cent stake in Debenhams , and said it wants to explore options ‘at an operational level’ to work with the UK’s No. 2 department stores group.
AMEC: The British engineer Amec has provisionally agreed to buy Foster Wheeler in a cash and share deal that values the Swiss-based engineer at 1.9billion.
MORRISON – The British grocer, under pressure since posting worse-than-expected Christmas sales, is set to face calls from a US activist investor to shake-up its property portfolio, the Financial Times said.