26th Jan 2015 17:11
LONDON (Alliance News) - London's leading stock indices closed higher for the eighth successive session Monday, overcoming initial declines caused by the victory of left-wing party Syriza in the Greek elections on Sunday.
Analysts said a measured response by European governments to the Greek result, which had been expected, combined with a positive hangover from the European Central Bank's decision last week to launch of a full quantitative-easing programme, steadied equities markets.
"Many had expected the Greek election to unleash chaos on markets, but with the ECB having launched QE and the impact of the new government in Athens being so difficult to quantify, it looks as if the default setting in Europe remains ‘buy on the dips’," said Chris Beauchamp, a market analyst with IG Group.
The FTSE 100 closed up 0.3% at 6,852.40 and the FTSE 250 up 0.1% at 16,470.52, both marking eight consecutive days in the green. The AIM All-Share lost 0.3% to 694.44, its third straight session of losses as the small-cap index continues to underperform.
European stocks outperformed London, the French CAC 40 closed up 0.7%, and the DAX 30 up 1.4% at 10,798.33, continuing its run of record highs. The German index was boosted by a positive IFO business sentiment index reading of 106.7 in January, slightly more than the 106.4 score expected by economists. In December, the index was at 105.5.
Wall Street was trading broadly lower at the London close, with the DJIA and S&P 500 both trading down 0.1%, while Nasdaq Composite was marginally lower. As the US fourth-quarter earnings season continues, Microsoft and Texas Instruments will be reporting after the close.
Syriza leader Alex Tsipras was sworn in as Greece's new prime minister Monday, hours after clinching a deal with the right-wing Independent Greeks to form an anti-austerity government. Syriza garnered 36% of the vote in Sunday's snap elections, falling short of an absolute majority in the 300-seat parliament by just two seats.
The success of the Syriza-led coalition could have profound ramifications for the future of the eurozone, which is already suffering from a host of economic woes, and could provoke a confrontation with Greece's international creditors, the European Commission, the European Central Bank and the International Monetary Fund.
"The calm reaction from European governments, alongside the significant leftover good-will from last week’s [European Central Bank] QE confirmation, allowed the Eurozone indices to remain in the green," said Connor Campbell, financial analyst at Spreadex.
"The challenge for the region now is weathering the impact of any Eurozone-related decisions Tspiras makes when he actually begins the practicalities of governing a debt-ridden Greece," Campbell said.
The euro also was higher on the day against other major currencies after initially falling on the election results. At the close of London equities trade, the euro was quoted at USD1.1275. The pound traded at EUR1.3361.
International Consolidated Airlines Group closed up 2.6%, the second-best performing FTSE 100 stock, after BG Group, up 2.9%. The British Airways owner raised its offer for Aer Lingus Group for a second time, saying it is now offering EUR2.55 a share in cash, which values the Irish flag carrier at EUR1.36 billion.
IAG originally offered EUR2.30 a share, and then raised its offer to EUR2.40 a share. The latest offer comprises a EUR2.50 in cash for each Aer Lingus share, plus a cash dividend of EUR0.05 per share. Aer Lingus said its board is considering the new offer. Aer Lingus shares closed up 0.9% at EUR2.372.
Shire ending up 1.1%. The Dublin-based pharmaceutical firm noted that NPS Pharmaceuticals Inc, which Shire is acquiring, had its Natpara drug for hypoparathyroidism approved by the US Food and Drug administration, saying it was further evidence of the value of the deal. The US FDA has approved Natpara as an adjunct to calcium and vitamin D to control hypocalcemia in patients with hypoparathyroidism, which is a rare endocrine disorder characterized by insufficient levels of parathyroid hormone.
Vedanta Resources closed as the biggest faller in the FTSE 250, down 9.1%. Credit Suisse cut the company's target price all the way to 500.00 pence from 900.00p, keeping its Neutral rating. The stock closed trade at 391.10p.
Petra Diamonds, down 8.5%, was the second worst mid-cap performer. The diamond miner said two exceptional diamond sales and weakness in the South African rand offset a softer rough diamond market in the first half, but its shares dropped after it warned downgraded grades and pricing guidance for the second half may mean it misses market expectations for the year.
It said the rough diamond market showed traditional seasonal weakness in the first quarter of its 2015 financial year, but said further pressure on prices has been driven by some short-term indigestion in the pipeline resulting from liquidity issues, polished inventory levels, and the impact of the strong US dollar on diamond prices denominated in that currency.
In the economic calendar Tuesday, the UK fourth quarter GDP reading is scheduled for 0930 GMT, and US durable goods orders for December are at 1330 GMT. Later in the afternoon, US Markit services and composite purchasing managers' index figures will be at 1445 GMT, and US consumer confidence will be at 1500 GMT.
In the corporate calendar, discount airline easyJet will issue a first quarter management statement, commercial property investment trust British Land Co will issue a third quarter interim management statement, as will carpet and floor covering retailer Carpetright. Housebuilder Crest Nicholson will be provide full-year results, and consumer products group PZ Cussons will report half-year results.
By Neil Thakrar; [email protected]; @NeilThakrar1
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