By This Is Money Reporters
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CLOSE: The FTSE 100 closed up 27 points at 6,615.58.
London shares overcame a lunchtime wobble to resume their advance in afternoon trading as US stocks powered ahead at open on hopes for China economic stimulus moves and following some further reassuring US data.
14.45:
With around two hours of trading to go, the FTSE 100 index was back up 27.6 points at 6,615.9, having dropped to a session low of 6,585.73 before lunch.
Miners led the blue chip gainers in London today, with the sector bouncing back after falls in the previous session following positive comments on China’s economy from its premier, Li Keqiang.
US boost: An opening jump on Wall Street helped the Footsie resume its upward trend today
His words eased fears that the China’s economy would continue to slow down, and reinforced views that the government of the top metal consuming country would act to stimulate growth if necessary.
But big falls by insurance stocks continued to weigh on blue chips today, as the sector took a tumble after it emerged the Financial Conduct Authority (FCA), is to investigate policies which penalise people who want to switch providers.
In early deals on Wall Street, the Dow Jones Industrial Average jumped 118.9 points higher to 16,383.2 supported by the China stimulus hopes and after domestic data showed both personal consumer spending and income ticked up in February, in line with expectations.
US consumer spending in February rose at the fastest rate since November as Americans spent more on health care and utilities, but in a negative sign, purchases of big-ticket items fell for the third straight month.
But other US data was less positive.
The final March reading of the university of Michigan consumer sentiment index falling to of 80 — the lowest level since November — from a final February level of 81.6, against a preliminary March reading of 79.9. Economists had forecast a final March level of 81.
Today’s UK data was also mixed.
Britain’s growth in the fourth quarter of 2013 was confirmed at 0.7 per cent , but overall economic growth in the year was revised to 1.7 percent, down from a previous estimate of 1.8 percent, albeit still matching a growth rate last seen in 2010.
Economists were encouraged that exports counted for more of the economy’s growth between October and December than previously thought and strong growth in business investment was confirmed.
But a fall in household incomes – down 0.1 percent from the third quarter – and a decline in the savings ratio to 5.0 percent from 5.6 percent raised some concerns about how long the recovery could last, with consumer spending having been the main driver of growth.
Martin Beck senior economic adviser to the EY ITEM Club said: ‘The composition of growth was promising as exports increased at a solid clip, while two of the major components of investment – residual and business – both grew at a robust pace.
‘That said, with household real disposable income seeing a fall in Q4, growth in consumer spending was financed by another decline in the household saving ratio.
’However, with real wage growth returning to positive territory as early as April, the foundations for further recovery in consumer spending should be more solid going forward,’ Beck added.
European stocks also saw strong gains today, with Germany’s Dax 30 up 1.1 per cent and France’s CAC 40 adding 0.4 per cent after figures showed a surge in consumer confidence helped boost economic sentiment in the euro zone in March to its highest level since July 2011.
Data from the European Commission saw economic sentiment across the 18-nation bloc increase to 102.4 in March, up from 101.2 in February, exceeding market expectations of 101.4, while the consumer confidence reading rose to -9.3 from -12.7 in February.
The increase will encourage those in the European Central Bank who have been grappling with deflation fears as sluggish price rises reflect weak consumer demand.
12.50: Footsie notched up modest gains at lunchtime as strength in the mining sector on China stimulus hope just outweighed big falls by the insurers on City watchdog probe fears.
By midsession, the FTSE 100 index was up 8.8 points at 6,590.3, not far from the session low of 6,588.32 having fallen back from an earlier peak of 6,631.34.
Insurance stocks occupied the top six places on the blue chip fallers board after it emerged the Financial Conduct Authority (FCA), is to investigate policies which penalise people who want to switch providers.
Footsie’s prop: Miners were boosted by positive comments from China’s premier, Li Keqiang which eased fears that the country’s economy would continue to slow down
The review by the FCA which is to begin this summer, will include pensions, endowments, investment bonds and life insurance and cover 30 million policies sold between the 1970s and 2000.
It follows concern that loyal policyholders are not being given the same priority as new customers and instead face high exit fees and substandard service.
The move is a fresh blow for the industry just a week after the Chancellor gave pensioners the freedom to draw down as much or as little of their pension pot as they want, removing the need to buy an annuity.
The latest probe comes as the FCA said it feared there was unfairness whereby some insurers use the returns from so-called ‘zombie’ funds – which are shut to new customers and often neglected by existing clients – to pay bills from other parts of their businesses.
It is thought the FCA could consider banning exit fees on old policies, or asking firms to move customers to better products, increasing investment in the management of old funds, or cutting fees.
Friends Life insurer Resolution, which was set up in 2008 to consolidate the life insurance industry and is a major manager of closed funds, lost 15 per cent of its value after diving 47.2p to 271.8p on the FTSE 100 index.
Phoenix Holdings, which has five million policyholders and is the UK’s largest consolidator of closed life assurance funds, tumbled 22 per cent or 163.5p to 573.5p in the FTSE 250 Index.
The latest blow to confidence was felt across the insurance sector, with Aviva down 38.1p to 445.3p, Legal & General off 14.6p to 197.7p, Standard Life 14.7p lower at 371.6p and Prudential down 64.5p to 1250.5p.
But the insurance sectors’ falls were balanced by a recovery from mining stocks after recent falls, with Anglo American up 33p to 1520p and commodities trader Glencore Xstrata ahead 6.3p to 313.5p.
Miners were boosted by positive comments from China’s premier, Li Keqiang which eased fears that the country’s economy would continue to slow down, and reinforced views that the government would act to stimulate growth if necessary.
‘The current belief that China is not going to let the economy fall too much should be supportive for the FTSE, and especially for the miners which on a relative basis have become attractive to some investors,’ said Lex van Dam, hedge fund manager at Hampstead Capital.
Medical devices firm Smith & Nephew was the leading FTSE 100 gainer, up 23.25p to 923.5p after Investec Securities said recent results were positive and made the company look like a growth stock again, leading it to upgrade its rating to buy.
Investec analyst Nicholas Keher also suggested splitting the group into three businesses – Advanced Wound Management, Endoscopy and Orthopaedics – even though there has been no suggestion by the company’s management that such an idea is being considered
While the FTSE 100 index index is set to record a fall of nearly 2 per cent for the first quarter – which ends on Monday – pegged back by concerns over China’s pace of economic growth and geopolitical tension over Ukraine, traders remain upbeat about its prospects.
But there were mixed prospects for the UK economy, it was confirmed that gross domestic product (GDP) rose by less than expected in 2013 – 1.7 per cent rather than 1.8 per cent – although the estimate for the fourth quarter of last year was left unchanged at 0.7 per cent.
Business investment rose by 2.4 per cent but hopes that the UK recovery is now on a more sustainable footing were hit when it emerged the current account deficit stood at a near-record of 22.4billion in the fourth quarter of 2013.
The figure, which shows the UK’s trade in goods and services as well as income and current transfers, was much higher than the City’s 14billion forecast and only slightly lower than the high seen three months ago.
Martin Beck, senior economic adviser to the EY ITEM Club said: ‘GDP growth in the final quarter of 2013 remained unchanged, despite another small downward revision to 2013 as a whole. The composition of growth was promising as exports increased at a solid clip, while two of the major components of investment – residual and business – both grew at a robust pace.
‘That said, with household real disposable income seeing a fall in Q4, growth in consumer spending was financed by another decline in the household saving ratio. However, with real wage growth returning to positive territory as early as April, the foundations for further recovery in consumer spending should be more solid going forward.’
09.20: Insurance stocks missed out on the Footsie’s early rally today, with the sector rocked again after it emerged the City watchdog is to investigate policies which penalise people who want to switch providers.
The review by the Financial Conduct Authority (FCA), which is to begin this summer, will include pensions, endowments, investment bonds and life insurance and cover 30 million policies sold between the 1970s and 2000.
It follows concern that loyal policyholders are not being given the same priority as new customers and instead face high exit fees and substandard service.
Insurers smacked: L&G shares were among the blue chip insurance stocks hit today by reports of an FCA sector probe
With the FTSE 100 index up 34 points to 6,622.5 in the first hour of trading, insurance-based stocks occupied the first six places on the blue-chip fallers board.
The move is a fresh blow for the industry just a week after the Chancellor gave pensioners the freedom to draw down as much or as little of their pension pot as they want, removing the need to buy an annuity.
Mike van Dulken, head of research at Accendo Markets said: ‘Investors are reacting to the possibility the UK’s FCA looks set to evaluate an existing 30m pension and investment policies dating back as far as the 1970s which may have been mis-sold, offer savers little but punitive costs and clauses making them near impossible to exit.
‘Should investors be allowed to exit policies and look for a better deal the sector may be punished with large out-flows of money from some zombie funds (closed to new customers for years) which may have been acting as cash-cows to offset newer more competitive offerings.’
Friends Life insurer Resolution, which was set up in 2008 to consolidate the life insurance industry, was the worst off, slumping 11 per cent or 38.3p to 280.7p.
Aviva fell 31.5p to 451.95p, Legal & General dropped 10.3p to 202.05p and Standard Life eased 10p to 376.35p.
On the second line, Phoenix Holdings, which has five million policyholders and is the UK’s largest consolidator of closed life assurance funds, was down 47p to 690p.
08.35: The Footsie pushed higher in early deals this morning, recouping yesterday’s falls in tandem with a positive session overnight in Asia following Chinese Premier Li Keqiang’s latest comments on the economy.
Analysts believe China could implement measures to boost stimulus after a string of deteriorating data has shown the economy is struggling.
In opening trade, the FTSE 100 index was up 23.4 points at 6,611.7, having closed 16.98 points lower on Thursday as a rally in the previous two sessions stalled with miners the leading fallers.
China hopes: Chinese Premier Li Keqiang’s latest comments today reassured jittery global investors that Beijing was ready to support its cooling economy
But that sector led the recovery today after the Chinese Premier’s move to reassure jittery global investors that Beijing was ready to support the cooling economy, saying the government had necessary policies in place and would push ahead with infrastructure investment. China is the world’s top consumer of metals.
Jasper Lawler, market analyst at CMC Markets (UK) said : ‘Chinese Premier Li Keqiang gave credence to the rumours of government stimulus that have been pushing world stock prices higher this week.
‘He said the government will “launch relevant and forceful measures” even stating that “financing costs of enterprises should be lowered” by using a mix of monetary policy tools and financial sector support.
‘This does seem counter to earlier statements by officials that the government’s focus will be on reforms rather than spending. It may well be the Premier is just talking up the possibilities to aid business confidence.
‘More importantly, it may be a telling sign of delusion on the part of the communist party’s central planners who appear to believe they can perfectly fine tune growth of 7.5 per cent in the economy despite an obvious slowdown in global demand for Chinese products and a domestic housing bubble bound to pop if offered more cheap credit,’ Lawler added.
On the domestic front, the final reading for UK fourth quarter GDP will be released at 09.30 am, with quarterly growth expected to be unchanged at 0.7 per cent.
As the economy continues its recovery from the financial crisis, British consumer sentiment rose in March to its highest level since around the start of the financial crisis in 2007, a survey from researchers GfK showed today.
Stocks to Watch include:
BP – More oil than previously thought may have leaked into Lake Michigan this week from BP’s Indiana refinery, the company said on Thursday, after two US Senators requested a meeting with the British oil major.
WILLIAM MORRISON – The chief executive of Wm Morrison Supermarkets is to waive his annual bonus after Britain’s No. 4 grocer posted a 13 per cent slump in 2013-2014 profit and issued a huge profit warning for the current year.
AVIVA – Aviva Investors, the asset management business of Aviva, has announced a definitive agreement to sell U.S. equity manager River Road Asset Management to Affiliated Managers Group.
BRIT GROUP – The Netherlands-based insurer is to price its London IPO at 240p per share, a source said told Reuters on Thursday, valuing the company at 960million.