UK stocks performed in line with pre-market expectations in morning trade with the FTSE 100 climbing 22 points (0.4 percent) to reach 5,244 in early afternoon, looking to snap a six day losing streak.
The markets shook off the disappointing results of today’s Spanish bond auction, which saw yields on the debt ridden country’s three and six month bonds top five percent.
The negative impact of the auction was offset by the news that the European Central Bank (ECB) spent nearly €8 billion on euro zone bonds, up from €4.48 billion in the previous seven days.
Bargain hunting also provided support for the market as traders bought into the cheap prices after the UK’s blue chip index fell to a six week low yesterday after Moody’s warned that further increases in borrowing costs could threaten the outlook on its top notch AAA rating.
In addition, it was reported that a bipartisan committee set up to agree on a plan to reduce the US deficit by US$1.2 trillion is set to meet the Wednesday deadline, leading to automatic cuts in budget spending.
However, Moody’s and fellow rating agency Standard & Poor’s told the markets that the anticipated failure of the “super committee” will not have an impact on America’s credit rating.
“There’s a fine balance between picking a bargain and a falling knife, so we think this is likely to keep markets range bound for some time, although when risky assets have heavy sell-offs as they did yesterday we are likely to see some buyers come in causing a short-term bounce before the next round of selling takes place,” said analyst at forex.com Kathleen Brooks.
Car insurer Admiral Group (LON:ADM, up 5.9pct at 864p), which was today identified among 43 stocks that pay dividends of over eight percent by HSBC, was the top performer in the top flight in morning trade.
Miners including Vedanta Resources (LON:VED, up 2.6pct at 972p) and Antofagasta (LON:ANTO, up 2.2pct at 1,031p) also did well as base metal prices rose.
The heaviest fallers included International Airlines Group (LON:AIG, down 5pct at 132p), which fell to the bottom of the FTSE 100 pile, and defence and aerospace group Meggitt (LON:MGGT, down 2.1pct at 376.8p).
US markets
Across the Atlantic, US markets started lower on the back of disappointing US GDP data. The Dow Jones Industrial Average (DJIA) fell 10 points to 11,537, while the S&P 500 was flat.
The Department of Commerce said this morning it has revised its US economic growth estimate for the third quarter from 2.5 percent to two percent, dampening optimism that the recovery in the US is gaining speed.
Traders in the US are now looking to the minutes from the latest policy meeting of the Federal Reserve, which will be released after close of play in London.
UK corporate news
Back in the UK, today’s news in the top flight included the formal inauguration of Royal Dutch Shell's (LON:RDSB, flat at 2,221p) Pearl Gas to Liquids (GTL) project in Qatar by Sheikh Hamad bin Khalifa Al-Thani.
Pearl GTL turns natural gas into liquid fuels and products, which Shell said “realizes the full upside of accessing the oil markets”.
When fully operational, Pearl GTL will have the capacity to produce 140,000 barrels a day of products such as gasoil, naphtha, kerosene, normal-paraffin and lubricants base oils. It will also produce 120,000 barrels a day of natural gas liquids and ethane.
In the FTSE 250, tour operator Thomas Cook (LON:TCG, down 73.5pct at 10.89p) lost nearly 80 percent of its value after revealing that that it is currently in talks with its lenders and will delay the release of its full year results.
The group said it entered discussions with its banks as a result of deterioration of trading in some areas of its business and in its cash position in the current quarter.
Consequently, Thomas Cook will not report its results for the full year to end September before the conclusion of these discussions.
Fellow midcap, pub operator Mitchells & Butlers (LON:MAB, up 0.5pct at 218.1p), also garnered attention today with its final results showing up among the most read RNS statements.
The group reported an increase of 1.8 percent in earnings before interest, taxes, depreciation and amortisation (EBITDA) to £398 million as sales surged 4.9 percent to £1.76 billion, calling it a “resilient set of results despite a challenging year”.
Mitchells & Burlers was cautious about the outlook, expecting the consumer environment to remain challenging and inflationary pressures to persist, especially from energy, duty and food.
And, finally, banknote printer and FTSE 250 constituent De La Rue (LON:DLAR, up 1pct at 884p) said its pre-tax profits improved to £29 million in the six months to September 24 from £23.8 million for the same period of 2010 as revenues rose from £209.2 million to £238.1 million.
The group said that banknote print volumes were materially above the previous half yearly period, adding that it remains confident of meeting its target of an operating profit of over £100 million by the financial year 2013-14.