Date: Friday 14 Sep 2012
- Footsie closes at highest level since mid-March
- Markets celebrate QE3 announcement
- Mining stocks surge as demand outlook improves
Massive gains in the mining sector lifted the FTSE 100 to a six-month high on Friday as markets reacted to the Federal Reserve announcement of further economic stimulus.
The Footsie closed at 5,916 today; the last time the index finished higher was on March 19th when it reached 5,961.
“Financial markets on both sides of the Atlantic have posted bulky gains today, buoyed by the Federal Reserve’s QE3 response announced yesterday,” said market strategist Ishaq Siddiqi from ETX Capital.
The Fed announced last night that it will launch its third round of quantitative easing, or QE3, by purchasing mortgage-backed securities at a pace of $40bn a month “to support a stronger economic recovery” and make sure that inflation stayed close to its target. It will also continue its Operation Twist programme to extend the maturity of its holdings.
“This is an ambitious response by the Fed and certainly a step in the right direction as it differs from the first and second QE programmes; however it remains to be seen if the plan is successful and potentially causes some headaches down the road. However, what is clear to markets is that the Fed is ready to support the US no matter what, just like the ECB pledged to Europe, and the commitment here by both central banks is the biggest driver behind the pickup in sentiment,” Siddiqi said.
In other news, the European Central Bank (ECB) has denied a report in Het Financieele Dagblad that it and the International Monetary Fund (IMF) are negotiating a €300bn bailout for Spain. The newspaper cited sources close to the talks.
The top 10 risers list on the FTSE 100 was dominated by the mining sector this afternoon as the demand outlook improved after the Fed announcement: Kazakhmys, Vedanta and Evraz were all 13% higher; while ENRC, Fresnillo, Anglo American, Xstrata, Antofagasta, Glencore and Randgold were making gains of between 6% and 11%.
Analyst Patrick Jones from Nomura said this morning: "The US Federal Reserve’s announcement of further quantitative easing could provide support for commodity prices and the mining sector. During the 2010 QE2 rally, the copper spot price rose by ~50%, while copper equities doubled on average." The broker said it continues to favour higher quality copper miners over their higher beta peers.
Rio Tinto this morning welcomed Australia's decision to re-examine allowing third parties on a rail network in the Pilbara region which the miner believes could seriously affect its operations.
Royal Bank of Scotland (RBS), Barclays and Lloyds were also making decent gains. RBS announced today that it is to launch an initial public offering (IPO) of its Direct Line Insurance Group, completing one of the conditions of its £45.5bn bailout from the government in late 2008.
InterContinental Hotels shareholders celebrated the news of the hotel group's special division, which will be 108.4p per share. The Holiday Inns group announced on August 7th that it planned to return $0.5bn of funds to shareholders via a special dividend tied to a share consolidation, plus another $0.5bn through a share buy-back programme, and it has now made good on that pledge.
Broadband and satellite TV group BSkyB was in the red after BT Group announced on Wednesday a £152m deal for exclusive rights to show Premiership Rugby, stealing the contract from Sky from the 2013-14 season onwards.
Defence contractor Chemring jumped after pushing back the deadline for The Carlyle Group to make an offer, after not receiving word the US asset management group.
Pubs group JD Wetherspoon was in demand after its new financial year has got off to a flying start, helped by a strong performance during the Olympic and Paralympic Games.
Second-tier miners were following their blue-chip peers higher, with Aquarius, Ferrexpo, Petropavlovsk, Fenner, Hochschild, New World Resources and Talvivaara on the up.
FTSE 100 - Risers
Kazakhmys (KAZ) 773.00p +13.68%
Vedanta Resources (VED) 1,090.00p +13.36%
Evraz (EVR) 293.70p +13.22%
Eurasian Natural Resources Corp. (ENRC) 363.20p +10.90%
Fresnillo (FRES) 1,870.00p +9.81%
Anglo American (AAL) 2,084.00p +9.17%
Antofagasta (ANTO) 1,334.00p +7.84%
Randgold Resources Ltd. (RRS) 7,420.00p +7.38%
Glencore International (GLEN) 378.85p +7.23%
Polymetal International (POLY) 1,081.00p +7.03%
FTSE 100 - Fallers
British Sky Broadcasting Group (BSY) 720.00p -3.23%
Reckitt Benckiser Group (RB.) 3,572.00p -1.71%
BT Group (BT.A) 233.00p -1.60%
GlaxoSmithKline (GSK) 1,417.50p -1.53%
Associated British Foods (ABF) 1,275.00p -0.93%
Vodafone Group (VOD) 175.85p -0.85%
British American Tobacco (BATS) 3,160.50p -0.68%
AstraZeneca (AZN) 2,893.00p -0.67%
Intertek Group (ITRK) 2,718.00p -0.40%
Diageo (DGE) 1,683.00p -0.38%
FTSE 250 - Risers
Aquarius Platinum Ltd. (AQP) 48.80p +18.73%
Ferrexpo (FXPO) 225.00p +14.80%
Essar Energy (ESSR) 131.50p +14.65%
Petropavlovsk (POG) 433.90p +14.64%
Fenner (FENR) 419.10p +9.86%
Hochschild Mining (HOC) 490.70p +9.04%
New World Resources A Shares (NWR) 313.00p +8.08%
Talvivaara Mining Company (TALV) 169.00p +7.78%
Man Group (EMG) 88.50p +7.66%
Centamin (DI) (CEY) 89.70p +7.43%
FTSE 250 - Fallers
Dunelm Group (DNLM) 640.50p -2.81%
Domino Printing Sciences (DNO) 554.50p -2.80%
Dialight (DIA) 1,184.00p -2.55%
Ruspetro (RPO) 112.10p -2.01%
Renishaw (RSW) 1,633.00p -1.98%
Mitchells & Butlers (MAB) 285.00p -1.49%
UBM (UBM) 710.50p -0.98%
TalkTalk Telecom Group (TALK) 187.10p -0.74%
RPS Group (RPS) 253.00p -0.71%
Computacenter (CCC) 396.70p -0.60%
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