By This Is Money Reporters
17.30 (CLOSE): Big-name insurers continued their shares fight-back after the bungled announcement of a regulatory probe into the sector on Friday forced the head of the Financial Conduct Authority (FCA) to insist he had no plans to quit.
Prudential, Aviva and Legal & General made gains as FCA boss Martin Wheatley admitted that the way it announced the inquiry into 30 million financial policies sold between the 1970s and the turn of the millennium was not its ‘finest hour’.
The wider FTSE 100 Index was also on the front foot – up 54.2 points to 6652.6 – thanks to gains from heavyweight mining giant BHP Billiton after it said it was considering a spin-off unwanted assets worth an estimated 11 billion.
Probe: The FCA has been criticised by George Osborne by leaking details about a planned probe.
Blue-chip stocks were also propelled upward on the back of strong overnight gains on Wall Street and Asia, after an indication from the US Federal Reserve that interest rates will need to remain low.
Meanwhile, there were mixed figures on China’s manufacturing sector, boosting hopes of stimulus measures for the world’s second biggest economy.
Markets in Germany and France also made gains while New York’s Dow Jones Industrial Average was ahead at the time of the close in the City.
On currency markets, sterling held firm at 1.66 US dollars and 1.21 euros.
In London, insurance stocks were among those making gains as the furore surrounding the FCA probe failed to die down – with even George Osborne weighing in to the controversy.
The Chancellor said he was “profoundly concerned” by the City watchdog’s botched announcement and demanded a thorough inquiry.
It saw the FCA first disclose details of its probe into the industry in a newspaper interview, then wait six hours after the stock market opened before clarifying the scope of its inquiry.
But Mr Wheatley told BBC Radio 4’s Today programme he had a ‘big job to do’ and was not planning to resign over the episode
While the regulator was under pressure, insurers rose, with Prudential up nearly 4 per cent, or 48.5p, to 1317p, while Legal & General added 7p to 211.7p and Aviva was up 15.1p to 492.1p.
BHP added 38p to 1882p after confirming a potential demerger of assets such as aluminium and nickel into a separate company.
Babcock International made strong gains for the second session in a row – up 3 per cent or 40p to 1387p.
It came after a broker upgrade in light of an announcement that the group, together with US partner Fluor, had been appointed preferred bidder for a 7 billion, 14-year contract to manage the decommissioning of 12 UK nuclear sites.
But Glasgow-headquartered Weir Group saw shares slip 18p to 2518p as investors digested its plans to merge with Finnish rival Metso in a deal that could create an engineering giant worth more than 8.5 billion.
Metso said it was not currently in talks with Weir but was considering the ‘unsolicited’ proposal.
The biggest FTSE 100 risers were Aberdeen Asset Management, up 26.2p to 416.5p, ARM Holdings up 49p to 1047p, Sports Direct up 40.5p to 892.5p and Prudential up 48.5p to 1317p.
The biggest FTSE 100 fallers were Sainsbury’s, down 6.6p to 309.5p, Pearson down 19p to 1044p, Morrisons down 2.2p to 210.8p and Mondi down 8p to 1041p.
15.45: The Footsie maintained its strong showing on the first session of the second quarter in late afternoon trade, holding near the day’s high as US stocks jumped higher in early deals.
With less than an hour of trading to go, the FTSE 100 index was up 53.7 points at 6,652.1, recovering from late falls in the previous session after some quarter-end position-squaring.
On Wall Street, the Dow Jones Industrial Average was 75.6 points higher at 16,533.3, extending the strong gains it saw on Monday as investors mulled over some slightly weak US manufacturing data.
Stocks up: A fresh advance on Wall Street helped keep the Footsie moving forward on the first session of the second quarter
The Institute for Supply Management’s manufacturing index edged up to 53.7 per cent in March, only slightly below the consensus forecast, while the final Markit US PMI reading for March was unchanged at 55.5, down from 57.1 in February, missing expectations for an uptick to 55.9 from the first reading.
However, commentators pointed out that any reading over 50 in both surveys continue to indicate growth.
US stocks continued to take heart from an indication yesterday from Federal Reserve boss Janet Yellen that US interest rates will need to remain low.
Her remarks tempered the comments she made after her first FOMC meeting last week which seemed to point to a rate rise 6 months after the US central bank’s bond-buying programme ends.
Jasper Lawler, market analyst at CMC Markets said: ‘Yellen appears to have chosen to emphasise the weak labour conditions seen currently rather than focusing on the improvements expected in the future as she did in the FOMC press conference.
‘This is quite the change of tone and markets could likely soon be forgetting all about “6 months” for a rate-rise.’
The key for markets, however, will be this Friday’s March US jobs report which Yellen’s comments on the weak labor market yesterday could trail.
12.50: Fresh strength in the mining sector helped London shares start the second quarter in positive fashion today, with the sector lifted by ongoing hopes for stimulus moves from top metals consumer China, with BHP Billiton boosted by news it is mulling a 11billion spin-off of unwanted assets.
At lunchtime, the FTSE 100 index was up 33.7 points at 6,631.9 carrying over strong overnight gains on Wall Street and Asia after an indication from Federal Reserve boss Janet Yellen that interest rates will need to remain low.
Meanwhile mixed figures on China’s manufacturing sector provided the fresh fuel for hopes of stimulus measures for the world’s second biggest economy.
BHP Biiliton boost: Shares in the world’s largest mining firm were boosted by potential demerger plans
China’s official PMIs rose to 50.3 in March from 50.2 in the prior month, but HSBC’s PMI reading for the month came in at an eight-month low of 48. Analysts said markets tend to trust the HSBC figure over the official China report.
As heavyweight miners moved higher in response to the China data, BHP Billiton stood out, adding 45.0p to 1,889.0p after it confirmed plans for a potential demerger of assets such as aluminium and nickel into a separate company.
Also on the up with the blue chips, fund manager Aberdeen Asset took on 24.5p at 414.7p after it said it planned to cut costs as subdued conditions in emerging markets meant a continuing outflow of funds. Aberdeen said it was cautious on the outlook but had a strong pipeline of business.
Mid cap fund manager Jupiter was also in demand today, adding 10.6p at 411.4p after announcing the sale of its private client and charities operations to Rathbone Investment Management for 43millon. Rathbone shares gained 24.0p at 1,838.0p.
Back with the blue chips, Babcock International was also among the biggest gainers for the second session in a row – up 53.0p to 1,400.4p – after a broker upgrade in light of yesterday’s announcement that the group, together with US partner Fluor, had been appointed preferred bidder for a 7billion, 14-year contract to manage the decommissioning of 12 UK nuclear sites.
The firm said today that it had also won a 21-year contract for the London Fire Brigade.
But fellow blue chip engineer Weir Group saw its shares fall 33.0p to 2,503.0p as investors digested the pumps firm’s plans to merge with Finnish rival Metso in a deal that could create an engineering giant worth more than 8.5billion.
Metso said it was not currently in talks with Weir but was considering the ‘unsolicited’ proposal.
Also among the blue chip losers, J Sainsbury fell 4.1p to 311.5p as Societe Generale cut its target price for the supermarket firm to 330p from 370p after reducing its earnings forecasts.
‘UK players will undoubtedly suffer from the ongoing deterioration in market conditions and what looks to be an imminent price war,’ SocGen analysts said in a note today.
‘Some have argued that Sainsbury’s weakness is that it has less room to manoeuvre for investing in prices due to lower margins. However, we think Sainsbury’s profitability is at a decent level and its strong differentiation is its best protection,’ they added maintaining a hold rating on the stock.
And shares in rival food retailer Tesco shed 3.4p to 292.1p as Espirito Santo issued a sell rating on the stock.
‘Tesco has not addressed its core offer on quality or pricing architecture. With high margins in all of Tesco’s key markets, we think Tesco may not grow for the next three years which underpins our reluctant consensual sell view. We believe Tesco’s ongoing concerns will be reflected at the full year results on 16 April,’ Espirito analyst Ric Thakrar said in a note.
10.55: The Footsie was on the front foot today following overnight gains on Wall Street and Asia after the US Federal Reserve assured interest rates will need to stay low for some time.
By mid morning, the FTSE 100 index was up 30.5 points at 6,628.9, following a gain of more than 130 points on the Dow Jones Industrial Average and a 1 per cent rise on the Hang Seng Index.
New Fed Reserve chair Janet Yellen eased market nerves yesterday after she said the US jobs market was still weak and insisted the country’s extraordinary monetary and stimulus policy was ‘still needed and will be for some time to come’.
US boost: Stock markets got a boost from strong gains on Wall Street after dovish comment from Fed boss Janet Yellen
Miners led the blue chip gainers once more on optimism over ongoing hopes for stimulus measures from China, with a string of weak economic data including manufacturing PMI numbers today lending support to a view the government will try to boost demand in the world’s largest metals consumer.
The Chinese premier said last week China could act to support infrastructure investment. BHP Billiton led the mining the sector higher, up 48.0p to 1,892.0p as it weighed a range of options to simplify its portfolio of assets, including a possible spin-off of unwanted businesses such as aluminium and nickel into a separate company.
Insurance stocks also continued to stage a fight-back after last Friday’s sharp falls prompted by the disclosure of a new regulatory probe into the sector.
Martin Wheatley, chief executive of the FCA, admitted the bungled announcement of the inquiry was not the FCA’s ‘finest hour’, but said he had not considered quitting despite the extreme market reaction.
Aviva rose another 8.9p to 485.6p, while Legal & General added 3.4p to 208p.
Among other blue chip risers, Babcock International climbed 4 per cent with a 58.0p rise to 1,405.0p after the London Fire Brigade named the engineering contractor as the preferred bidder on a 21-year contract to manage its vehicle fleet.
The gains, which built on a strong advance seen on Monday fuelled by a nuclear contract win, saw the stock more than recoup its losses from last week when Babcock announced a big rights issue to fund the acquisition of helicopter firm Avincis.
Traders ignored some downbeat economic data today, with growth in British manufacturing unexpectedly easing to its slowest pace in eight months in March and prices paid by factories tumbling.
The Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) fell in March to 55.3, its lowest reading since July last year and below all forecasts in a Reuters poll of economists February’s reading was sharply cut to 56.2 from an originally reported 56.9.
It was the fourth month in a row that the index fell although it remained comfortably above the 50 mark that denotes growth.
Meanwhile minutes from last month’s Bank of England’s Financial Policy Committee said investors may be too relaxed about what will happen when interest rates start rising to more normal levels.
The FPC minutes also said that recent policy changes by central banks in rich countries had not greatly affected markets.
The FTSE 100 has opened 27.7 points higher at 6,626.1 on expectations of continued economic stimulus from the US and China.
08.30: Investors were reassured by dovish comments from US Federal Reserve boss Janet Yellen, who said an easy monetary policy would need to remain in place for some time.
Meanwhile, persistent weakness in China’s manufacturing sector was seen as boosting the chances of increased government spending to spur growth.
Fed watch: US central bank boss Janet Yellen said an easy monetary policy would need to remain in place for some time
Manufacturing data from the UK, eurozone and US is due out later today. The Markit/CIPS survey of UK manufacturing for March is forecast to show a small drop to 56.7 from 56.9, according to a Reuters poll.
Any figure above 50 indicates growth, while any result below that signals contraction.
The FTSE 100 closed down 17.21 points at 6,598.37 yesterday, after a see-saw session which saw it trade between 6,583 and 6,658. It ended down 2.2 per cent for the year so far on the last day of the first quarter.
‘Despite signs suggesting that central banks are going to be firmly committed to easy monetary policy following yesterday’s weak EU Consumer Price Index [inflation figures], overnight dovishness from Yellen and more weak manufacturing data from China, traders are still likely to tread cautiously ahead of upcoming data releases,’ said Jonathan Sudaria of Capital Spreads.
‘Today sees the state of global manufacturing with several key regions releasing their own data and expectations are that it will show a global economy that is chugging along in an acceptable manner just above contractionary levels but still susceptible to a downside shock.’
He added: ‘Tensions between Russia and Ukraine might ease as the former appeared to pulling its troops from the border.’
Stocks to watch today include:
WEIR GROUP: The engineer is said to be in talks to takeover its Finnish rival Metso Oyj in an 8.5billion deal to expand its industrial pumps and valves market, the Times reported.
BANKS: Hong Kong’s de facto central bank said it is investigating a number of banks as part of the global probe into alleged manipulation of foreign exchange markets, as investigations into the $ 5.3trillion-a-day-market escalate.
ROYAL MAIL: The National Audit Office said the government’s cautious approach to last year’s sell-off of postal group Royal Mail led to a sale price that had short-changed the taxpayer.
BT: A report by the House of Commons’ Public Accounts Committee has accused BT of exploiting its monopoly position and criticised the Government for failing to deliver ‘meaningful competition’, the Times reported.
BABCOCK: The London Fire Brigade has named the engineering firm as the preferred bidder on a 21-year contract to manage its vehicle fleet.
ICAP: The broker said activity in its global broking division dropped in February and March due to lower trading volumes on global markets.