The UK benchmark index surged more than 100 points on Wednesday—more than making up for the previous day’s slide—after bumper figures from US bank JP Morgan & Chase promoted financials on both sides of the Atlantic and a jump in commodity prices fuelled resource stocks.
The FTSE 100 index took on 102.0 points to close 2.0% higher at 5,256.1, which puts its spectacular rise over the past six months to just shy of 50%. Though this is the highest closing level in over a year, it is still a long way off the average levels of a year before, when the blue-chip index frequented the mid-6,000s before the credit crunch took hold. The FTSE 250 index today gained 152.5 points or 1.6% to settle at 9,541.3.
Wednesday's increase in risk appetite wasn’t a one-off: investors’ hunger to take on risk has increased to the highest levels in more than three years, according to a BoA-Merrill Lynch fund manager survey for October. The survey also revealed this morning that sentiment surrounding European investments—particularly banks—is notably picking up while global fund managers are switching to ‘riskier’ equities rather than continue to hold cash. Read this article for more findings.
Among UK equity movements, Barclays jumped 6.6%, Lloyds Banking Group gained 3.7% and Royal Bank of Scotland climbed 2.9%, while Asia-focused HSBC and Standard Chartered took on a respective 2.7% and 1.7%, after banking giant JP Morgan exceeded market expectations by a huge margin.
The group, which was the first of the major banks to report third quarter results, was forecast to achieve earnings in the region of $0.52 per share. Instead, it posted $0.82 per share, compared to the previous year’s writedown-hampered $0.09 per share, and reported growth across both its commercial and retail banking divisions, with fixed-income revenue a particular winner.
But it was resources stocks that accounted for most of the FTSE 100’s performance as investors sought out riskier sectors and helped further by commodity price strength. Copper prices stood out, benefiting from official Chinese data that revealed the nation’s exports declined at their slowest pace in nine months in September.
As such, Vedanta Resources, Kazakhmys, Xstrata and Rio Tinto were among the top blue-chip gainers, each adding between 9.4% and 5.3%. Cairn Energy missed out on the top spot but closed a close second, up 8.6% as firmer oil prices combined with news it has secured $1.6 billion in funding and an additional $310 million from an asset sale. Tullow Oil, BG Group, Royal Dutch Shell and BP each received a fillip from the news, rising 2.2%-3.6%.
Other outstanding performers included Man Group, which added 3.3% after Morgan Stanley upgraded the hedge fund manager to Overweight, and Invensys, which rose 2.5% on the sector read-across following stellar results from US chipmaker Intel.
Among the few blue-chip casualties, Diageo lost 2.1% after the beverages manufacturer reported a greater-than-expected slide in first quarter sales.
On the second line, Punch Taverns plummeted 16.6% as in-line full-year numbers belied pub write-downs and a cautious management outlook. Read this article for more on this item.
On the economic front, as well as China’s upbeat export news, US business inventories fell by a better-than-expected 1.5% in August as sales climbed, while UK unemployment increased by the smallest number recorded in the past year—88,000 more people were looking for work in August compared to the previous month.
