Investors bought financial services stocks as Lloyds Banking Group’s purchase of credit card business MBNA boosted confidence in the sector and helped lift the FTSE 100 to a two-month high.
Shares in the bank, still part-owned by the taxpayer, rose 1½p to 64p after news of the £1.9 billion deal. Analysts at Davy said that the deal was a “positive development” which would increase Lloyds’ scale in a “targeted growth area with an attractive return on investment”.
Banks were also boosted by the news that the Italian government was seeking parliamentary approval to borrow €20 billion to support its fragile banking sector and potentially rescue Monte dei Paschi.
Barclays closed up 5½p at 227¾p while Royal Bank of Scotland shares climbed 3¼p to 226¼p as financial services dominated the leaderboard.
While the movement in the sector helped edge the FTSE 100 up 26.8 points to 7,043.96, it was Carnival, the owner of Cunard cruises, which was the biggest winner.
Record fourth-quarter earnings, released in the middle of the session, sent shares in the company sailing up 122p to £41.45, outperforming the rest of the leisure sector which struggled to make gains after Monday’s terror attack in Berlin.
Shares in easyJet were down 6p to £10.28, while IAG, the owner of British Airways, was down 2¼p to 452½p. InterContinental Hotels Group was more resilient, rising 17p to £35.41, as was TUI, the owner of Thomson Holidays, based in Hanover, which was up 6p to £11.29.
Supermarkets and high street brands were among the biggest winners on the top index as investors were buoyed by figures from the CBI showing retail sales grew at the fastest rate in more than a year.
Andrew Hughes, an analyst at UBS, said it had been a “dire year” for the sector but a reversion to normal weather trends could mean “a higher proportion of full prices sales” while Marks & Spencer “could surprise” on margins.
The retailer was the best performer in the sector yesterday, rising 4¼p to 357p. It was followed by Tesco which jumped 2¼p to 204¾p while Next was lifted 48p to £49.63.
In construction, Barratt Developments led a small surge in home building shares, rising 5¾p to 467p, while Persimmon were up 15p to £17.35, with Taylor Wimpey making a marginal ½p gain to close at 154¼p.
At the other end of the top index, Hikma Pharmaceuticals led the fallers as it shed 42p to close at £18.19, despite gains elsewhere in the sector.
Fresnillo also underperformed the FTSE 100, slipping 23p to £10.91p while Randgold Resources dropped 70p to £56.35. The stocks were hampered by a weakening in the gold price and Chris Beauchamp, chief market analyst at IG, said that precious metals had been given “no space” since the Federal Reserve raised rates last week.
Others speculated that fund managers were beginning to book profits on stocks that had performed well this year, with British miners up 95 per cent in the past 12 months.
On the FTSE 250, Polypipe led the losers, falling 13¼p to 308¼p and leading the mid-cap down to finish the day 12.55 points lower 17,769.85.
Carpetright was the biggest faller in the all-share, index dropping 7½p to 158½p, after Microsoft founder Bill Gates reduced his investment.
Heading up the rollercoaster
Shares in Paysafe rose more than 5 per cent yesterday after the company announced a £100 million buyback programme.
The FTSE 250 digital payments business said that it would start buying shares over the next year to take advantage of its weak share price after a report from a short-seller triggered a raid on stocks.
The note, published on an online investment research platform, had alleged that Paysafe appeared to enable illegal gambling in China.
Paysafe dismissed the report but the allegations sent its shares tumbling to 305¾p last week. It has begun to claw back some of the losses and yesterday’s announcement boosted confidence in the company, previously known as Optimal Payments.
Shares climbed 18½p to 360½p and led the mid-cap index.
Joel Leonoff, president and chief executive of Paysafe, said the programme “underlines our confidence in the business and its future prospects”.
“The programme, and our track record of significant cash conversion, enable us to capitalise on current market opportunities without compromising our pursuit of bold M&A with a strong strategic fit.”
Wall Street report
The Dow Jones industrial average continued to taunt traders with the holy grail of 20,000, heading up another 91.56 on continued optimism about the new political regime but ending the session just shy at 19,974.62 — a record close.