Markets on the rise as confidence seeps back
Oct 21 2008 by Iain Laing, The Journal
THE rally on the London market continued apace yesterday as strong gains from banks and oil companies saw the FTSE 100 Index advance another 5.4%.
The Footsie closed 219.7 points higher at 4282.7 after a late session burst, with early gains on Wall Street adding momentum to the rebound.
The Dow Jones continued that advance, eventually closing over 400 points higher at 9,265.43, a rise of 4.6% on the day.
The rise of the FTSE 100 yesterday followed an increase of more than 5% on Friday and market experts said trading had shown signs of returning to normality after the recent heightened volatility.
But there were still sharp fluctuations seen by a number of stocks and sectors yesterday as investors eyed opportunities.
The biggest upward impact came from the energy sector after crude futures rose on signs that Opec will cut production in order to stem the recent sharp fall in prices. Mining and oil companies both saw a lift with BP lifted more than 10% to 476.75p.
The gains offset another nervy session for some insurers amid concerns about the impact of the economic downturn on investments held in the sector.
RSA Insurance was the biggest faller with a drop of 3% to 116.3p but Prudential bucked the trend, rising by 22% or 60.25p to 330.25p, amid speculation it could attract external investment as part of an attempt to buy the Asian arm of troubled US giant AIG. Pru shares fell heavily at the end of last week.
It was joined on the risers board by some of the UK’s beleaguered banks, with Royal Bank of Scotland up 15.9p at 84.5p and Barclays ahead 15.75p at 236.75p.
There were also some big movements outside the top flight, with housebuilders back under pressure after it emerged mortgage lending slumped to its lowest level for more than three and a half years during September.
Meanwhile, Wall Street surged on a burst of optimism yesterday, propelling the Dow Jones industrials up on more signs of a reviving credit market and comments from Federal Reserve Chairman Ben Bernanke.
Investors who had sold furiously in recent weeks in response to frozen credit markets became more optimistic as bank-to-bank lending rates eased further.
The improvement in lending rates helped to temper concerns about tight credit contributing to a prolonged recession, but Bernanke still warned that the economy is likely to be “weak for several quarters, and with some risk of a protracted slowdown.”
He told the House Budget Committee that a fresh round of government moves might help ease the country’s economic weakness – comments that played well among Wall Street’s traders.
