LONDON (ShareCast) - - ECB keeps rates unchanged; future rate cut eyed
- Cameron, Obama call for ‘immediate plan’
- Miners and financials jump, ABG rockets

The Footsie finished over two per cent higher on Wednesday afternoon as miners and financial stocks surged on speculation of future changes to monetary policy in Europe.

The European Central Bank (ECB) decided once again to leave its key interest rate unchanged. The decision to leave the rate at 1% is more or less in line with the analyst consensus, although some economists were calling for a rate cut due to recent indications of falling economic activity in the Eurozone. In the subsequent press conference, however, ECB President Mario Draghi said: “We monitor all developments closely and we stand ready to act”.

Draghi also said that a few members, though not many, had called for lower rates: this was a “significant turnaround”, according to analyst Philip Shaw from Investec. “Overall we have not changed our views as a result of the press conference. We remain reasonably convinced that the ECB will bring the refi down again by 25 basis points to a new low of 0.75%.”

Nonetheless, Draghi shied away from in any way promising a new round of long-term financing for banks (shorter term loans, however will be freely available until at least year’s end). Some observers see in such a decision a desire on the part of the central bank not to make-up for governments’ lack of action. Having said that, the ECB President seems to have weighed in favourably on the topic of the European Stability Mechanism injecting funds directly into banks," indicate analysts at Digital Look.

“It’s now down to Ben Bernanke tomorrow to provide a further boost to the markets in order to keep the recent rally going,” said analyst Craig Erlam from Alpari, drawing attention to tonight’s release of the Federal Reserve’s Beige Book.

In other news, Germany may be preparing a plan that will allow Spain to recapitalise its banks with the help of European partners but without having to implement additional economic reforms, according to official German sources.

After a phone conversation UK Prime Minister David Cameron and US President Barack Obama have said that there needs to be “an immediate plan” to resolve the sovereign debt crisis in Europe.

In domestic news, the Markit/CIPS UK construction purchasing managers’ index for the month of May came in at 54.4 points, a three-month low, versus the 55.8 seen in April. Nevertheless, the consensus estimate was for a reading of 54.2.

FTSE 100: Miners and financials lead the rise

Miners surged today on the back of stronger metals prices. Meanwhile, Australian gross domestic product (GDP) rose by 1.3% during the first three months of the year, well ahead of the 0.6% growth expected by analysts, boosting the outlook for metals demand. Vedanta Resources, Randgold Resources, Fresnillo, Kazakhmys and Anglo American all finished the day over 7% higher. Also helping the sector were reports of Chinese authorities fast-tracking infrastructure investments.

Hedge fund manager Man Group, which had lost 40% of its share price in 2012 so far, was among the best performers after Citigroup upgraded its rating on the stock to buy, saying that "Man is now at the end of its downgrade cycle." However, the US broker did cut its earnings estimates for the group today.

Banks too were putting in a strong performance. Barclays announced this morning that its subsidiary Absa Bank has agreed to buy the accounts and receivables relating to the private label store cards of Edcon Proprietary in South Africa for around £0.8bn. Also to be had in account, Barclays is entitled to recover roughly $1.8bn of disputed assets and interest related to Lehman Brothers' bankruptcy, a US federal judge said, reversing a decision by a federal bankruptcy judge. Lloyds revealed that it is to sell a portfolio of Australian real estate loans for £388m. Meanwhile, HSBC said that the merger of its Omani operations with Oman International Bank has been approved and completed.

RBS's shares were trading over the 200p mark today after a share consolidation, which has had the counter-balancing effect of reducing the number of shares each shareholder owns while at the same time increasing the value of each share. Nevertheless, even based on Friday's adjusted share price, RBS shares were still sharply higher, as banking stocks made gains.

Heading the other way was Vodafone after going ex-dividend, meaning that new shares do not have the right to the group's latest pay-out. Vodafone also announced this morning that it is talking with Australian peer Telstra about buying its New Zealand subsidiary, TelstraClear. According to the Financial Times, the deal could be worth around A$300-400m, or £191-255m.

FTSE 250: African Barrick Gold sparkles late on

Shares in gold miner African Barrick Gold (ABG) surged in afternoon trading after its US parent company announced that it has replaced its President and Chief Executive Officer Aaron Regent with Executive Vice President and Chief Financial Officer Jamie Sokalsky.

“On behalf of our board, I would like to thank Aaron for his significant contribution to Barrick's development. We are fully committed to maximising shareholder value, but have been disappointed with our share price performance,” said Barrick’s founder and Chairman Peter Munk.

Energy firm Premier Oil rose after seeing an encouraging drilling result on the Carnaby exploration well 28/09-5A in the Central North Sea Block 28/9.


FTSE 100 - Risers
Vedanta Resources (VED) 963.50p +9.05%
Barclays (BARC) 187.80p +8.24%
Randgold Resources Ltd. (RRS) 5,980.00p +7.65%
Kazakhmys (KAZ) 714.50p +7.44%
Fresnillo (FRES) 1,472.00p +7.37%
Man Group (EMG) 80.85p +7.09%
Anglo American (AAL) 2,091.00p +6.93%
Royal Bank of Scotland Group (RBS) 213.20p +6.65%
CRH (CRH) 1,121.00p +6.56%
Antofagasta (ANTO) 1,053.00p +6.26%

FTSE 100 - Fallers
Vodafone Group (VOD) 168.95p -2.71%
Tate & Lyle (TATE) 643.00p -1.61%
British Sky Broadcasting Group (BSY) 670.50p -0.89%
InterContinental Hotels Group (IHG) 1,470.00p -0.81%
Smith & Nephew (SN.) 590.50p 0.00%
Severn Trent (SVT) 1,761.00p +0.06%
Next (NXT) 2,993.00p +0.07%
Whitbread (WTB) 1,843.00p +0.16%
Morrison (Wm) Supermarkets (MRW) 276.80p +0.18%
Weir Group (WEIR) 1,485.00p +0.20%

FTSE 250 - Risers
African Barrick Gold (ABG) 400.20p +14.54%
Talvivaara Mining Company (TALV) 147.20p +14.11%
New World Resources A Shares (NWR) 305.80p +13.68%
Centamin (DI) (CEY) 72.35p +11.05%
Aquarius Platinum Ltd. (AQP) 71.65p +10.57%
Avocet Mining (AVM) 161.60p +10.31%
Afren (AFR) 114.50p +9.78%
Petropavlovsk (POG) 425.60p +9.66%
Lonmin (LMI) 765.50p +9.51%
PayPoint (PAY) 698.00p +8.72%

FTSE 250 - Fallers
Supergroup (SGP) 285.90p -5.02%
Dixons Retail (DXNS) 12.84p -4.68%
RPS Group (RPS) 198.70p -3.21%
Bumi (BUMI) 320.00p -3.03%
Logica (LOG) 107.00p -2.73%
Home Retail Group (HOME) 71.50p -2.72%
JD Sports Fashion (JD.) 665.00p -2.71%
Spirit Pub Company (SPRT) 49.75p -2.45%
Booker Group (BOK) 84.10p -2.21%
Senior (SNR) 192.00p -2.19%

BC

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