FTSE opens the week up on firmer commodity prices

The FTSE 100 opened with gains of over 40 points before 09:00BST with solid commodity prices helping the mining and energy sector. But with euro zone debt crisis fears - which crippled the UK’s top index last week to a new six month low - still looming, analysts are predicting limited gains for the UK market this week.

Kate Neilson
shareprices.com - Monday, May 24, 2010

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BP Chief Exec Tony Hayward discussing oil-leak opeeration with the US Coast Guard

The index dropped below 5,000 for the first time since November 2009 last week, if only for a brief moment, and on Friday recorded a third consecutive day of loss. In fact, the FTSE is currently 6.5 per cent down so far this year.

Analysts had predicted a strong start to this week as investors looked to book quick profits. But the strength of a ‘relief rally’ will determine how the market proceeds from here as many fear the market will not react strongly with euro zone worries, the UK Coalition Government announcing a £6bn spending cut and British firms having their own specific issues.

BP (LON:BP) is currently over one per cent down today and almost 20 per cent down for the month as the group’s measures to solve the oil spill issues in the Gulf of Mexico have been unsuccessful. On Sunday, U.S Interior Secretary Ken Salazar announced the American Government will take over the attempts to solve the leak problem and blasted BP for its shortcomings.

He said: “We are 33 days into this effort, and deadline after deadline has been missed. If we find they're [BP] not doing what they're supposed to be doing, we'll push them out of the way appropriately”.

Investors have reacted well to British Airways’ (LON:BAY) strong standpoint and refusal to back down to staff strikes with the share price in the headline-grabbing airline group improving by as much as one per cent before 09:30BST. The airline’s 12,000 cabin crew began a five-day strike in protest to Willie Walsh’s, BA’s CEO, plans to cut staffing levels and wages to halt the firm’s recent record losses. Fellow travel groups, TUI Travel (LON:TT.) and Thomas Cook Group (LON:TCG) have also posted gains of over one per cent this morning.

Banks face a tough few weeks as the new UK Government ponders following in the footsteps of the US in targeting banks by taxing them as much as £8bn as a means to take further cuts out of the budget deficit. RBS (LON:RBS), HSBC (LON:HSBA), Lloyds Banking Group (LON:LLOY) and Barclays (LON:BARC) were all in the region of 0.5 and 0.9 per cent down at 09:30BST as a result.

The mining a energy sector both opened strongly at 08:00BST but have generally started to drop as the morning has commenced. The outstanding stock is the mining sector is Rio Tinto (LON:RIO) which has said it is reviewing all capital spending plans in light of the super-tax plans in Australia that will hit mining profits with a tax of 40 per cent.

 

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