FTSE 100 starts new year with a bang
The FTSE 100 Index started the new year with a bang today as it rallied past 6000 with a gain of more than 2%.
London’s Footsie soared nearly 150 points at one stage in its first trading day of 2011, continuing the strong December bull-run which saw it rise 9% in 2010 and reversing losses made on New Year’s Eve.
The London market was buoyed by strong performances from heavily-weighted banking and mining stocks, while oil giant BP raced to a six-month high amid takeover talk.
Fresh speculation linking BP to an opportunistic takeover bid from rival Royal Dutch Shell sparked a surge in shares at the beleaguered firm.
Reports suggesting BP may not need all of its $20bn (€15bn) compensation fund to repay the victims of the Gulf of Mexico oil spill also contributed to the group’s 6% shares advance.
The boost added £4.8bn (€5.6bn) to the company’s market value, but at 491p shares are still way down on the peak of 655p seen before the explosion.
BP is due to publish full-year results on February 1, when it may announce a resumption of dividend payments.
Commodity stocks were also helped today by renewed optimism over the global economy, which saw oil prices reach as high as 92 US dollars a barrel before falling back.
Financial information firm Markit added to the buoyant mood on the London market when its purchasing managers index for eurozone manufacturers hit an eight-month high.
This was mirrored in the UK after the Chartered Institute of Purchasing and Supply recorded the manufacturing sector’s strongest performance in 16 years.
Ben Potter, a market strategist at IG Markets, said: “There’s definitely an air of optimism about the global economic outlook now.”
Investors also shrugged off fears that today’s VAT rise from 17.5% to 20% would curb consumer spending and push the UK back into a double-dip recession.
David Buik, an analyst at BGC Partners, said: “As for VAT, I am not sure it will have as devastating an effect on life as many would have us believe.
“Yes, maybe retail sales will fall by as much as £2.2bn (€2.6bn) in the first quarter, but if the economy gets a little momentum behind it, perhaps the damage it may cause will be minimal.”
