UK equity markets were not short on surprises on April Fool’s Day, though the majority were fortunately positive rather than mischievous. US jobs data, a major merger in the exchange space, and an opportunity to digest the Irish banks stress test results were main supporters of upbeat investment sentiment today.
The FTSE 100 index added 101 points or 1.7% to close the week at 6,009, above the elusive 6,000-point mark and 1.9% higher than where it started on Monday. The FTSE 250 index gained 117 points or 1.0% to 11,708 today.
Portugal’s bond auction, announced by the country’s authorities only yesterday, dominated morning headlines, as traders elsewhere awaited payroll data from the US. While the sovereign debt sale was successful, the event hardly had the magnitude to negate the argument that Portugal will eventually need an EFSF bailout. “The market had assumed that the auction would be a “success” and the authorities must have known there were willing buyers lying in the wings, otherwise why would they put themselves like lambs to the slaughter to the market,” commented Kathleen Brooks, a UK and EMEA Research Director at Gain Capital.
Meanwhile, the first round of Purchasing Managers’ Indices for most key economies since the tsunami in Japan and war in Libya, were released. China saw a modest improvement in March, while the overall aggregate global and EU economies’ figures were lower, albeit still above the 50-point mark which is the cut-off point between expansion and contraction. “There’s nothing in the March PMI news from around the world to suggest anything other than continued solid global economic growth, with no hint whatsoever of any impending ‘soft patch’,” said Ian Harwood, Chief Economist at Evolution Securities.
The news that cheered investors came from US labour data. The US economy added 216,000 nonfarm jobs in March. The increase was higher than economists expected and underscores the steady improvement in the labour market. The unemployment rate fell to 8.8% from 8.9% in February, while the average hourly wages and workweek were unchanged from last month. The private sector added 230,000 jobs while the public sector shed 14,000 as local governments laid off workers.
On the corporate front, one of the biggest news items today was Nasdaq OMX (NDAQ) and IntercontinentalExchange’s (ICE) cash-and-stock offer to buy NYSE Euronext (NYX) and carve up exchange operator. The offer values NYSE Euronext at around $11.3 billion and trumps that already agreed from Deutsche Boerse by more than 20%. NYSE Euronext said it would carefully consider the news offer. Meanwhile, the London Stock Exchange (LSE) jumped 2.8% on the FTSE 250 and the Deutsche Boerse (DBOEY) dropped 1.4% in Frankfurt.
Among other individual movers on the FTSE 100, heavyweight banks came in as top winners after the Irish bank stress test yielded results that were broadly in line with expectations. It concluded that Irish banks will need up to EUR 24 billion in recapitalisation. London-listed banks Lloyds Banking Group (LLOY), Barclays (BARC) and Royal Bank of Scotland (RBS) added 3.8%-5.0% as their shares reversed the knee-jerk reaction seen in closing deal Thursday as the EUR 24 billion figure first emerged.
The top gainer among UK blue chips was John Wood Group (WG.), up 5.1% after it received shareholder approval of its Well Support division disposal to GE Energy.
Elsewhere, BP (BP.) added 3.5% after analysts at JP Morgan added the oil group to its EMEA analysts focus list, citing the stock as substantially undervalued. UK markets closed before news of leaks in a BP Texas refinery came in.
On the flipside, typically-defensive equities Serco Group (SRP) and International Power (IPR) dipped in what has very much been a risk-on start to the second quarter. The two companies shares dipped 1.8% and 0.9%.
Finally, investment company 3i Group (III) fell to the bottom of the short list of FTSE 100 fallers, down 4.4% after its market update revealed the underperformance of several of the investment trust’s UK companies, specifically those in the public and consumer sectors. Overall, the group said that business in Northern Europe is strong.
