Stronger-than-expected growth from the US economy in the third quarter had benchmark indices rallying around the globe on Thursday. But with the UK one of the few major economies still in recession, the FTSE 100 index underperformed its international peers.
The FTSE 100 index took on 57.3 points or 1.1% to 5,137.7, while the FTSE 250 index gained 112.9 points or 1.3% to 8,962.4. Meanwhile, Wall Street indices climbed closer to 2% higher at the time of the UK close.
Official figures revealed US gross domestic product increased at an annual pace of 3.5% in the third quarter—its first rise in over a year and bringing an end to North America’s worst recession since World War II. The economic expansion was swollen by government stimulus programmes such as ‘cash for clunkers,’ but the boost to sentiment saw stock markets gather pace on both sides of the Atlantic.
Forecast-topping earnings from industry stalwarts such as Colgate-Palmolive, Procter & Gamble and Motorola also offered support.
In London, the economic recovery story helped fuel miners, with Xstrata, Fresnillo, Kazakhmys and Anglo American all featuring on the leaderboard with gains of 5.6%-7.4% apiece.
But it was state-controlled banks Royal Bank of Scotland and Lloyds Banking Group that took the top two spots after Lloyds said it is reviewing its fundraising options in an attempt to avoid using the government’s toxic asset insurance programme. The bank also announced that talks with the European Union suggest that should it have to sell assets, as ING has been forced to do, these will not have a material impact on the group.
Lloyds, which is majority owned by the UK government, jumped 7.5%, while RBS, which is in a similar predicament, gained 9.5%.
Other financial sector players, including insurer Prudential, Asia-focused bank Standard Chartered, and interdealer broker ICAP also benefited from the upbeat market sentiment, which helped each take on between 3.3% and 4.9%.
The blue-chip index’s overall climb was hampered, however, by weak performances from heavyweights Royal Dutch Shell and AstraZeneca. The former dropped 3.0% after reporting softer-than-expected third quarter results, whereby profits tumbled 62% year-on-year under pressure from the global recession and weaker oil and gas prices during the quarter. Click here to read our analyst’s take on the figures.
Meanwhile, AstraZeneca lost 1.3% as its own third quarter numbers were overshadowed by news it is assessing the impact of increased aspirin consumption on the efficacy of its experimental blood clot prevention medicine. Concern that the results could limit the drug’s potential profitability hit the shares, despite the stronger-than-predicted quarterly results. However, the bulk of this outperformance was due to unsustainable gains, according to our analyst. Click here for more on Astra’s results.
On the second line, National Express stood out for the wrong reasons. The bus and rail operator was driven 12.0% lower after its rejected a £1.6 billion merger proposal from peer Stagecoach and said it would instead look to reduce its debt via an equity fundraising.
