October 24, 2013 / 7:53 AM / 6 years ago

FTSE boosted to five-month high by earnings and banks

LONDON (Reuters) - Britain’s main share index rose on Thursday to a five-month high, boosted by strong earnings reports and a rebound in financial and basic material stocks.

The London Stock Exchange building is seen in central London September 24, 2009. REUTERS/Stephen Hird

The blue-chip FTSE 100 index closed up 0.6 percent, or 38.70 points, at 6,713.18 points, its first close above 6,700 since May.

A daily close above 6,700 indicated that the upward trend was very strong, Fawad Razaqzada, technical analyst at GFT said, adding the level could turn into support for future gains.

“We’ve broken through the bearish trendline around 6,600 in recent days, and the fact that we’re holding at these highs is very bullish.”

Leading gainers was Shire, which surged 9.3 percent in afternoon trade after releasing results at midday that raised its full-year forecast on the back of lower than expected costs and accelerating sales.

Advertiser WPP also gained after results.

Financials, which include banks, asset managers and insurers, accounted for a third of the index’s gains.

Aberdeen Asset Management led the way in the sector with a 5.8 percent gain after it entered talks to buy Scottish Widows Investment Partnership from Lloyds in a deal which could turn Aberdeen into the largest listed fund manager in Europe. Traders described it as a good deal for both sides.

“The market doesn’t think it is a bad thing for (Aberdeen) to be getting more under their belt and on the contrary, they’re buying some pretty safe stuff,” Will Hedden, sales trader at IG, said.

Lloyds extended gains to trade up 2.8 percent at its highest level since 2008. Hedden said the deal helped the bank refocus on its core business.

Euro zone-exposed banks Lloyds and Royal Bank of Scotland had already been trading higher before the news. Their shares bounced after being among the top fallers in the previous session, when the European Central Bank (ECB) outlined tougher-than-expected stress tests for regional lenders.

The ECB said it would review the quality of a broad range of assets held by top European banks next year, which could mean lenders have to raise fresh capital.

Banks rose 0.8 percent, although they failed to fully regain ground lost on Wednesday.

“The kneejerk reaction yesterday was to send the sector sharply lower ... but with time to reflect, investors are trying to assess which banks might be relatively less impacted, and the UK-domiciled names fall into that camp,” said Jeremy Batstone-Carr, analyst at Charles Stanley.

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Mining stocks were up 0.7 percent, buoyed by a rise in the flash Markit/HSBC Purchasing Managers Index (PMI) for China to a seven-month high in October.

Numis analyst Cailey Barker said the Chinese manufacturing data, along with expectations that the U.S. Federal Reserve is unlikely to scale back economic stimulus measures until early 2014, would support mining stocks in the months to come.

“The number shows expansion in manufacturing which is likely to continue into the fourth quarter,” said Barker. “Strong PMI numbers coupled with the view that the Fed is unlikely to taper until the first quarter should see mining companies have a strong run into the new year.”

Editing by Ruth Pitchford and Mark Potter

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