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Banks, commodities lift FTSE on debt solution hopes

Published 12/02/2010, 07:28 AM
Updated 12/02/2010, 07:32 AM
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* FTSE 100 gains 0.6 percent

* TUI Travel jumps after profit at top end of expectations

* Banks, commods rise on hope debt crisis will be contained

By Joanne Frearson

LONDON, Dec 2 (Reuters) - Britain's leading share index rose on Thursday, boosted by banks and commodities on hopes the European Central Bank will contain the euro zone debt crisis, while TUI Travel jumped after results.

By 1152 GMT, the FTSE 100 index was 35.17 points, or 0.6 percent, higher at 5,678.15 to be ahead for a second session after ending November down at levels not seen since mid-September.

Banks were in demand recovering from earlier falls in the session on hopes of recovery in the euro zone debt crisis.

Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered rose 0.9-1.9 percent.

"Markets are looking for some good news from the European Central Bank president Jean-Claude Trichet," Peter Dixon, economist at Commerzbank, said. "That they will continue supporting the euro zone countries in trouble, and obviously the FTSE will benefit from any news on that front."

Since Ireland's EU-IMF bailout pressure has been growing on the ECB to act as contagion fears have grown that other countries such as Portugal and Spain could need a bailout.

Although it was unlikely the ECB would announce new bond purchases, there have been suggestions it could rush through new anti-crisis measures, such as expanding its government-bond buying.

Commodity stocks continued their rise from Wednesday, tracking firmer metal and crude prices on recovery expectations and as upbeat economic data out of China, Europe and the United States in the previous session suggested demand was still strong.

Oil service firm Petrofac gained 2.8 percent after Goldman Sachs upgraded it to "buy" from "neutral".

Miners Rio Tinto, Anglo American and BHP Billiton were 0.9-2.5 percent higher, while African Barrick Gold rose 1.8 percent, boosted by a gold find at its North Mara mine in Tanzania.

TUI TRAVEL JUMPS

In earnings news, TUI Travel, Europe's biggest travel company, rose 5.9 percent after full-year operating profit came in at the top end of expectations.

Chief executive Peter Long declined to comment on prospect of a bid from German namesake TUI.

Elsewhere, GKN gained 4.8 percent, boosted by a rise in U.S. auto sales. "It is really the only FTSE stock exposed to the auto market," a trader said. "There was a consensus short on it, and that is being squeezed which is also helping it."

On the downside, drugmakers were under pressure.

GlaxoSmithKline slipped 0.7 percent after the U.S. Food and Drug Administration recommended against the wider use of its prostate drug Avodart.

Later in the session, investors will eye U.S. weekly jobless claims at 1330 GMT and October U.S. pending home sales data at 1500 GMT. (Editing by Dan Lalor)

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