20th Apr 2015 15:52
LONDON (Alliance News) - UK blue-chip shares rallied Monday, led by the heavily weighted mining sector, after the People's Bank of China moved to stimulate the Chinese economy by making more money available for banks to lend.
The FTSE 100 closed up 0.8% at 7,052.13, and the FTSE 250 closed up 0.2% at 17,603.47. The AIM All-Share index, however, closed marginally lower at 749.45, falling just short of recording a tenth successive session of gains.
European stock markets also were buoyed by the Chinese stimulus measure, with the CAC 40 in Paris closing up 0.8% and the DAX 30 in Frankfurt up 1.7%. At the London close, Wall Street was posting broad gains as well, with the DJIA up 1.4%, the S&P 500 up 1.0% and Nasdaq Composite up 1.2%.
The People's Bank of China on Sunday lowered the reserve requirement ratio for banks by 100 basis points in order to provide some stimulus after disappointing Chinese economic data last week. The central bank lowered the amount set aside by banks as reserves to 18.5% effective Monday. This was the second reduction this year, an action taken after the economy logged its weakest growth in six years.
Mark Williams, chief Asia economist at Capital Economics, said the action signals a stepping-up of policy support. It also suggests that any concerns policymakers have about the rapid gains in equity prices in Hong Kong and Shanghai have been put on the back burner for now.
However, the move by the central bank was not enough boost the Hang Seng or Shanghai Composite stock indices, both of which ended significantly lower after the Chinese stock regulator on Friday had moved to increase liquidity in the market by allowing fund managers to lend shares for short-selling and also expanded the number of stocks investors can short sell. Shanghai had hit its highest level since March 2008 on Friday, with a shortage of available stocks to sell blamed for exacerbating the move higher.
In London, miners Rio Tinto, up 2.6%, Anglo American, up 2.7% and BHP Billiton, up 2.5% were all amongst the best FTSE 100 performers. In the FTSE 250, Vedanta Resources added 4.8%, and KAZ Minerals ended up 3.1%. The FTSE 350 mining sector index was the best performing sector index, up 2.0%
Greece continued to command attention as the struggling nation made more moves to secure funds for its upcoming payments to its international creditors. The Greek government on Monday ordered a mandatory transfer of cash reserves from pensions funds and other state bodies to its central bank, in a desperate bid to gather enough cash to remain solvent, according to a number of media outlets.
"This authoritarian move from the left-wing Syriza shows how dire things are getting in Greece, with Athens blaming 'unforeseen circumstances' for this latest scramble for funds," said Spreadex financial analyst Connor Campbell. "However this didn't deter the Eurozone indices, which have turned a collective blind eye to the worrying goings-on over in Greece to continue their muscular rebound this Monday afternoon."
Ashtead Group closed as the best performer in the FTSE 100, up 2.9% at 1,144.00p, after Barclays raised its price target on the equipment rental company to 1,405.00 pence from 1,289.00p, maintaining its Overweight rating.
Petrofac closed down 10%, by far the worst performer in the FTSE 250. The oil and gas services company said it will book a further GBP130 million pretax loss on its Laggan-Tormore gas plant project on Shetland in the UK, blaming weather-related delays, an issue with a sub-contractor, low worker productivity and the requirement for more work than it had previously expected.
Kibo Mining ended as the best performer in the AIM All-Share index, up 57%. The Tanzania-focused mineral explorer and developer said it has signed a joint development agreement with Chinese engineering and construction company SEPCO III for the Rukwa coal-to-power project in western Tanzania.
In another quiet economic calendar Tuesday, the Japanese leading economic index is at 0600 BST and German and eurozone ZEW survey results at 1000 BST.
In a much busier UK corporate calendar, though, there are third-quarter results from broadcaster Sky, first-quarter results from chip maker ARM Holdings, and half-year results from Associated British Foods. Pets at Home Group issues a trading statement, and miner Rio Tinto issues a first quarter operational review.
By Neil Thakrar; [email protected]; @NeilThakrar1
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PetrofacSkyAnglo AmericanKAZ.LRio TintoBHP Billiton PLCVedanta ResourcesKibo EnergyAB FoodsAshtead GroupPets at homeARM.L