RTRS: FTSE ends up on oils, pharmas before Fed; HSBC dips
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FTSE ends up on oils, pharmas before Fed; HSBC dips
Tue Dec 16, 2008 12:14pm EST
* Tullow Oil rises on Ugandan oil find
* Defensive pharmaceuticals in demand
* HSBC falls on fundraising worries
By Dominic Lau
LONDON, Dec 16 (Reuters) - Britain's blue chip index ended higher on Tuesday, ahead of the U.S. Federal Reserve's rate decision, as energy and pharmaceutical stocks rose, although heavyweight HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) fell on fundraising fears.
Energy stocks were the top-weighted gainers after Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) surged 8.5 percent after it and mid-cap Heritage Oil (HOIL.L: Quote, Profile, Research, Stock Buzz) announced a "significant" new oil discovery at an exploration well in Uganda.
Heritage Oil advanced 6.7 percent, while Royal Dutch Shell (RDSa.L: Quote, Profile, Research, Stock Buzz) and Cairn Energy (CNE.L: Quote, Profile, Research, Stock Buzz) added 1.8 and 2.1 percent, respectively.
The FTSE 100 .FTSE closed up 31.52 points, or 0.7 percent, at 4,309.08 in a choppy session. More than 928 million shares changed hands, compared to 872 million on Monday and last week's daily average of 1.12 billion.
Drugmakers rose, with GlaxoSmithKline (GSK.L: Quote, Profile, Research, Stock Buzz) and AstraZeneca (AZN.L: Quote, Profile, Research, Stock Buzz) up 1.7 and 2.2 percent respectively.
Banking giant HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) shed 1.2 percent on talk it could have to raise up to $14 billion to rebuild capital, dealers said. HSBC declined to comment.
Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) and Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz) also fell, but Barclays (BARC.L: Quote, Profile, Research, Stock Buzz), HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz) and Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) were higher.
In the United States, Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz) reported its first quarterly loss since going public nine years ago. Rival Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) is due to release its fourth-quarter results on Wednesday.
The U.S. Federal Reserve is widely expected to cut interest rates to just 0.5 percent or lower at around 1915 GMT on Tuesday, after the European market close. Fed fund futures showed a 64 percent chance of a 75 basis point cut to 0.25 percent.
"People are concerned about ... if they start bringing the rates to zero what would the fine detail of expansion be. That's going to be the major concern," said Stephen Pope, chief global market strategist at Cantor Fitzgerald.
U.S. consumer prices plummeted again during November and construction starts on new homes slumped to a record low.
"If the Fed delivers a big cut, then we should have another big cut from the Bank (of England)," Pope said.
Bank of England Governor Mervyn King said inflation could fall below 1 percent next year. Inflation eased to 4.1 percent in November from 4.5 percent in October but that is still well above the government's 2 percent target.
3I AND ADMIRAL HIT
Private equity company 3i (III.L: Quote, Profile, Research, Stock Buzz) sank nearly 13 percent as shareholders -- concerned about its debt burden and the outlook for its portfolio companies -- look for an exit.
Admiral (ADML.L: Quote, Profile, Research, Stock Buzz) shed 11.7 percent after Merrill Lynch downgraded the insurer to "neutral" from "buy" and cut profit forecasts on concerns over reduced investment income.
Miners were other underperformers, with BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), Vedanta Resources (VED.L: Quote, Profile, Research, Stock Buzz), Lonmin (LMI.L: Quote, Profile, Research, Stock Buzz) and Antofagasta (ANTO.L: Quote, Profile, Research, Stock Buzz) losing between 1.9 and 3.4 percent. However, Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz) and Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) rose 3.1 and 1.5 percent, respectively.
British American Tobacco (BATS.L: Quote, Profile, Research, Stock Buzz) put on 2.4 percent after RBS raised its 2008 and 2009 earnings per share forecasts for the cigarette maker to reflect recent currency moves.
"We see risks to equity performance in the short term and stick to our current sector recommendations. We have a portfolio positioning where we are cautious, but start to invest in a recovery in the real economy in late 2009 by having an overweight position in general retail," Cazenove said in a note.
"From a defensive perspective, we favour tobacco and telecoms over healthcare and food producers and from a yield perspective we favour the oil and gas sector." (Additional reporting by Jon Hopkins and John Coppock; editing by Simon Jessop)
