Market overview: FTSE closes down 3 at 5,432

Date: Monday 11 Jun 2012

1630: Short-term business prospects have improved, with output expectations reaching a 12-month high, according to BDO, an accountants and businesses advisor. However, it's not all good news as longer-term growth prospects have been dampened by the tempestuous Eurozone crisis, which has undermined UK business confidence. Meanwhile, the number of cases of people falling behind of their council tax is up 27 per cent despite the majority of English councils freezing their charges, a debt charity has reported. In UK companies, financial stocks were tracking their European counterparts higher, as the continent's banking industry celebrated Spain's request for aid. Barclays, Lloyds and HSBC were among the highest risers. The FTSE 100 closed down 3 points at 5,432.

1446: Airline stocks IAG and easyJet are making gains today after the International Air Transport Association maintained its 2012 global airline profit forecast of three billion dollars on the back of falling oil prices. However, the airline body (which represents around 240 carriers) predicted that European carriers may collectively post a loss of 1.1bn dollars this year, more severe than the 600m-dollar loss forecasted in March. Tony Tyler, head of IATA, told Bloomberg TV today that ‘if there’s a full-blow crisis, all bets are off […] It will have a big impact on the world economy and a huge impact on airlines.’ Global profits totalled seven billion dollars last year. FTSE 100 up 13 at 5,448.

1402: The FTSE 100 is up 36 points at 5,471, some 65 points off its intraday high of 5,536, as the initial euphoria surrounding the Spanish bank bailout has quickly faded. US stock futures have now pared earlier gains and are pointing to a moderate start. Shavaz Dhalla, a trader from Spreadex, said that investors should still remain cautious: ‘headline trading is likely to return to the markets this week, which could potentially be partnered with volatility, as the focus moves from Spain back to Greece with the anticipated elections due in Greece this Sunday.’

1304: Stocks continue to cede gains, probably due to the uncertainty regarding which bail-out fund (EFSF or ESM) will be used to recapitalize Spanish banks, although it is thought that it will be the ESM. In theory the decision which is finally taken in that regard will decide the 'seniority' of any new bonds. Critically in that regard, analysts at IFR are being cited as saying that recourse to the ESM would trigger CDS contracts on Spanish bonds, as it is not 'voluntary.' FTSE 100 up 28 to 5,463.

1145: The FTSE 100 was firmly in positive territory towards the end of the morning, but the index was trading well off its intra-day high of 5,532 as investors digested this weekend's request from Spain for a bailout for its troubled banks. Engineering group GKN was a high riser after its Aerospace division was awarded a contract by US aircraft maker Boeing at the weekend to supply complex machined titanium and aluminium parts and assemblies for the horizontal stabiliser of the 787-9 Dreamliner. FTSE 100 up 48 at 5,483.

0922: After a bright start leading shares appear to be in consolidation mode. Engineer GKN is on the climb after Citi reiterated its neutral stance on the stock in a review of the sector. Insurance giant Aviva is another stock in demand despite lukewarm broker opinion; Oriel Securities has reiterated its 'hold' rating. FTSE 100 is up 92 at 5,527.

0838: London has reacted positively to the 100bn euros of assistance given to the Spanish financial sector, with Footsie bursting through the 5400 barrier. Banks are wanted in the wake of developments in Spain, with chunky gains seen for Lloyds, RBS and Barclays. Mining stocks are also thriving, while the only two Footsie constituents not joining the party are safe and dependable utilities United Utilities and National Grid. Tesco is firmer after its first quarter trading update, though it is under-performing the FTSE 100, which is up 81 at 5,516.

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