London’s blue-chips ended the week by continuing their new year rally as investors across the globe piled into equities.
The FTSE 100 put on 20.07 points to 6,121.58 yesterday, closing at its highest level since May 2008 and taking the week’s overall gain to 0.5pc, following a 2.8pc rise last week. The mid-cap FTSE 250 (FTSE: ^FTMC - news) also reached new heights, climbing 67.05 to 12,797.83.
Recent advances in UK shares have formed part of a global equity rally that was sparked by the approval of a compromise deal on the US “fiscal cliff” on New Year’s Day. The resulting optimism saw investors around the world pour about $22bn (£13.6bn) into equity funds in the week ending January 9, new figures from data company EPFR Global showed. This was the second-highest weekly inflow on record, based on figures going back to 2000, and the best week in more than five years.
Dealers and analysts have begun to speculate whether the moves could herald a broader move back into shares from safe-haven bonds.
Back in London, Aviva (LSE: AV.L - news) was in demand after investor fears of a dividend cut at the insurer were allayed. Shares in the blue-chip company came under pressure earlier this week when Barclays (LSE: BARC.L - news) speculated that Aviva could end up cutting its dividend by 15pc. However, analysts at Citigroup (NYSE: C - news) yesterday offered an upbeat assessment of shareholders’ payout prospects.
“We expect Aviva to generate strong cash flow in the coming years, sufficient to redeem hybrid debt and cover the current level of dividend,” they said, lifting their recommendation to “buy” from “neutral”. The analysts also said they were more confident that Aviva would complete its restructuring plan, helping the shares advance 12.1 to 380.1p.
British Airways and Iberia parent International Airlines Group moved 10.7 higher to 207.6p, the biggest FTSE 100 (FTSE: ^FTSE - news) riser, on the back of an upgrade to “buy” from “neutral” at UBS (Berlin: UBRA.BE - news) . Analysts at the bank said they were more hopeful about a restructuring at Iberia after an agreement was reached with unions to avoid strikes at the Spanish carrier last month.
Taking the FTSE 100’s wooden spoon was Tullow Oil (LSE: TLW.L - news) , down 39p at £11.86 following a disappointing trading update. The wider oil and sector was in focus yesterday, with some analysts speculating that merger and acquisition activity could start to hot up. Scribblers at Exane BNP said Ophir Energy (Other OTC: OPGYF - news) was one potential target, although shares in the FTSE 250 group fell 25½ to 537p on the news that BG Group (LSE: BG.L - news) would not extend a contract for a rig at its joint venture with Ophir off the coast of Tanzania.