UK Stocks Gain on Debt Auction Strength

123jump.com Staff
26 Mar, 2009
New York City

UK stocks gained on the strength in financials and mining stocks and better reception to its latest debt auction of inflation protected bonds. The UK government placed 1.1 billion pounds of bonds expiring in 2022 offered with real yield of 1.375%. The auction bids were 2.7 times the offer size.

[R]7:00PM London, 3:00 PM New York – UK stocks gained on the strength in financials and mining stocks.[/R]

Stocks in London gained grounds on the hopes that banks will be able to exchange debts and raise the regulatory capital. The optimism in the financial sector was also followed by a gain in commodities prices.

UK inflation protected bond sales also attracted sufficient interest to complete the auction after failing to cover in the previous debt offering yesterday.

The inflation protected bond offering of 1.1 billion pounds expiring in 2022 offered at 1.875% yield with real yield of 1.375%. The auction received 2.72 times the offer size.

The FTSE 100 index gained 0.6% or 24.95 to close at 3,925.20.

Banks Surge

Barclays Plc stock surged on the speculation that it may propose a plan to buy back or exchange debt for equity especially after Royal Bank of Scotland offered a similar plan. RBS proposed to exchange 13.5 billion pounds of bonds and Lloyds offered to exchange 7.5 billion pounds for senior unsecured debt.

Lloyds Banking Group Plc surged 12% and Royal Bank of Scotland added 7.4%.

Barclays has been working feverishly to avoid UK government funding and is looking to sell its popular iShares exchange traded fund division. Barclays for more than a year has suggested that it has adequate capital and recently said that the business in the first two months was stronger than expected. In the last one year of trading, Barclays has dropped 66%.

Miners Rise

Mining companies participated in gains in trading on the back of a rise in copper and other base metal prices. BHP Billiton added 3.6% to 1,459 pence, Rio Tinto Plc soared 7.4% to 2,382 pence and Antofagasta Plc added 2.2% to 520 pence.

Gainers & Losers

Of the FTSE 100 index 40 declined and 60 rose and 2 were unchanged.

British Land Company Plc led decliners in the FTSE 100 index with a fall of 4.5% followed by losses in BAE Systems Plc of 4.4%, in Centrica Plc of 4.4%, in ICAP Plc of 3.9% and in BT Group Plc of 3.8%.

Eurasian Natural led gainers in the FTSE 100 index with a rise of 17% followed by Barclays Plc with a rise of 13.5%, in Legal & General Group of 12%, in Lloyds Banking of 11.6% and in Kzakhmys Plc of 9.3%.

Man Group Plc increased 5.5% or 11.5 pence to 219 pence after the company said that it will focus on doubling its managed account business. The asset manager operates several hedge funds.

Europe Markets Review

In London FTSE 100 Index closed higher 24.95 or 0.64% to 3,925.20, in Paris CAC 40 Index decreased 1.38 or 0.05% to close at 2,892.07 and in Frankfurt DAX index higher 36.08 or 0.85% to close at 4,259.37. In Zurich trading SMI decreased 3.64 or 0.07% to close at 4,966.74.