Investors buoyed by hopes of continuing QE while banks lifted by buy notes and Citigroup results
Leading shares reached their highest level since the end of May, as the recent central bank-fuelled revival continued.
With US Federal Reserve chairman Ben Bernanke recently calming nerves about an imminent end to the bank's money printing measures to boost the US economy, investors continue to accentuate the positive. But Bernanke is due to speak again in a testimony later this week, while volumes were fairly thin as the summer heatwave continues, so further volatility cannot be ruled out. On top of that, the eurozone crisis staggers on, with political uncertainty in Spain and Portugal, and continuing protest over cutbacks in Greece.
The FTSE 100 finished 41.17 points higher at 6586.11 with little economic news to attract attention, beyond weaker US retail sales which confirmed the idea the Fed would continue its bond buying programme and Chinese GDP data which was much in line with expectations.
Banks were among the main risers, with Royal Bank of Scotland rising 15.6p to 320p, Lloyds Banking Group lifted 1.71p to 69.44p and Barclays 3.6p better at 309.75p. Barclays was helped by talk it may not be held to strict new requirements on risk from the Prudential Regulation Authority, part of the Bank of England, after a recent U-turn on Nationwide.
In a buy note, Ian Gordon at Investec said:
Barclays is seeking pari passu treatment with its peers. If granted, it would...avoid any capital issues and safeguard the supply of credit to the real economy.
Gordon was also positive on RBS following last week's mortgage figures, raising his target price from 320p to 335p:
A 1 for 10 share consolidation in June 2012 was intended to deliver reduced share price volatility, yet RBS's rollercoaster ride continues. The shares have risen 13% in 7 trading days, and we see further upside ahead. We expect RBS to be a key beneficiary of Friday's strong mortgage data – May was the best month since October 2008 – and we see the PRA's new 3% adjusted leverage ratio entrenching higher asset pricing from which RBS will benefit.
Reasonable results from US giant Citigroup and news that Commerzbank had sold €5bn worth of UK property loans to US groups Wells Fargo and Lone Star also helped sentiment in the sector.
Base metal miners were helped by the Chinese data, with Anglo American adding 6p to 1300.5p and Glencore Xstrata up 1.4p at 261.85p. But precious metal specialists were unwanted, with Randgold Resources down 121p at £42.72 and Fresnillo falling 22.5p to 958.5p.
Elsewhere Sage slipped 10.8p to 356.1p ahead of third quarter figures next week after Morgan Stanley repeated its downbeat view of the accountancy software specialist, labelling it one to avoid.
Struggling security firm G4S, which was accused by the UK government last week of allegedly overcharging for tagging contracts, dipped 2p to 207.5p on weekend reports that shareholders, who include Bill Gates, could be tapped for cash to help bolster its balance sheet.
GlaxoSmithKline fell 4.5p to 1744.5p after further bribery allegations from China. Meanwhile AG Barr, whose proposed merger with Britvic fell apart last week, was said to be interested in buying Glaxo's Lucozade and Ribena brands in tandem with private equity groups. Analyst Damian McNeela at Panmure Gordon said:
We think that these brands would broaden Barr's portfolio and via Lucozade, provide the opportunity to access export markets. The implied valuation range of £1bn to £1.2bn for these brands would suggest that it makes sense for AG Barr to team up with private equity, and this could be the catalyst for us to become more positive on the shares. However the deal structure will be crucial in determining the merits for equity investors and accordingly we retain our hold recommendation for the time being.
Barr, best known for Irn Bru, dipped 2p to 521.5p.
AstraZeneca lost 5p to £32.62 after news that finance director Simon Lowth was leaving to take the same role at gases group BG, up 7.5p at £11.85.
Among the mid-caps Salamander Energy slid 16.7p to 135p after the oil and gas company announced it was plugging and abandoning its Rayong exploration well in the Gulf of Thailand after it failed to find hydrocarbons. Canaccord Genuity said:
This well result clearly reduces the attractiveness of this basin (the Kra Central) and Salamander will prioritise its efforts elsewhere on the licence. The company is testing a number of different play types and drilling will continue with five more wells planned this year.
Despite this we view the news as disappointing since we think Salamander's share price still requires exploration success to justify the valuation.
Invensys added 1.5p to 509.5p on hopes of a bid battle for the industrial group.
France's Schneider Electric made a £3.3bn or 505p a share offer last week, which the UK group said it was likely to recommend. But the likes of Germany's Siemens, ABB of Switzerland or Emerson Electric in the US were mooted as possible rival predators, and over the weekend came reports that America's GE was considering a counter-bid.
Among the retailers, Mike Ashley's Sports Direct International climbed 25.5p to 593p ahead of this week's results, while SuperGroup rose 46p to 942.5p as Canaccord Genuity issued a buy note with an £11 price target.
Finally Premier Foods, the business behind Batchelors, Oxo, Hovis and Mr Kipling, put on 6p to 77p on vague trader talk of possible bid interest, with a price of some 120p mentioned. The company's substantial shareholders include private equity group Warburg Pincus and hedge fund Paulson & Co. Last week it announced a reorganisation of its milling business, including the closure of its Barry site.
There were also reports that Premier had devised a plan to raise money from suppliers who wanted to do business with the company.
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