UK Stocks closing : Bank and commodity stocks hoisted Britain’s top shares to a five-week closing high on Monday, on mounting optimism over the prospects for a solution to Europe’s debt crisis after a weekend meeting of French and German leaders.
The FTSE 100 ended up 95.60 points, or 1.8 percent, at 5,399.00, after Nicolas Sarkozy and Angela Merkel pledged to unveil new measures to solve the euro zone debt crisis by the end of the month.
Volumes were thin at 64 percent of the index’s 90-day daily average, an indication investors were not fully convinced by the news, with traders saying markets were likely to be jittery until the leaders deliver on their promise.
Three weeks is a long time in the markets, and (they) could remain volatile, Manoj Ladwa, senior trader at ETX Capital, said.
Andrew Bell, chief executive of the 1.1 billion pound ($1.7 billion) Witan Investment Trust, said: They now have a better understanding of the gravity of the problems caused by their persistently disappointing. So … downside risks have reduced.
However, he added: There remain risks of disagreements or obstructionism by euro zone governments and if the markets rally too far on hope of a credible solution this might weaken the recently-won sense of urgency.
A small increase in put protection — options to hedge against downside risk — was seen, although notably less than over the last week, according to Atif Latif, director of equities and derivatives at Guardian Stockbrokers.
Mining and energy stocks added most points to the index as the nervousness subsided over the euro zone debt situation, at least for now.
UBS shifted its stance on risk assets to neutral from underweight, citing a willingness by European leaders to be prepared to recapitalise banks as a reason behind its move.
Oil major BP and Royal Dutch Shell added 2.9 percent and 2.5 percent respectively, while Anglo American notched up a 3.7 percent rise.
The revival in sentiment among investors helped banks and insurers too, as financials played catch-up after falling on Friday when Moody’s cut its ratings on 12 UK financial institutions.
Barclays , up 4.5 percent, led banks higher, while Old Mutual , 5.1 percent firmer, was best off among insurers.
On the second tier, however, emerging markets lender International Personal Finance sank nearly 9 percent, as the market assumed that downbeat news from east European lender Erste would read across to IPF, though some analysts poured cold water on this idea.
Erste warned it will make a net loss this year of up to 800 million euros ($1 billion) after taking hits on its foreign currency loans in Hungary and euro zone sovereign debt.
Elsewhere, London-listed corporates exposed to a sluggish UK economy continued to cause concern for investors following profit warnings from Premier Foods and Mothercare the previous week.
Michael Page International shed 1.6 percent as the British recruiter commented on uncertainty in its markets in a third-quarter trading update, prompting Altium Securities to downgrade the stock to hold from buy.