The blue-chips finished the day at a fresh five-year high.
The FTSE 100 closed within touching distance of the key 6,400 level, a barrier it broke through during intra-day trade as London’s blue-chips continued their relentless climb higher.
Today’s minutes from the latest Monetary Policy Committee meeting, indicating the Bank of England was moving closer to introducing another round of quantitative easing, spurred the benchmark index beyond that psychologically important mark.
The weakness of the pound played a part in the index’s strength, with a number of blue-chip exporters benefiting from recent currency moves. Indeed, the MPC (KOSDAQ: 050540.KQ - news) minutes’ release drove down sterling against the dollar.
“It’s all currency,” was one trader’s explanation for the FTSE 100’s performance. Some, however, saw the rally as being driven by genuine appetite for shares. “Where else are you going to put your money?” asked another.
The main board rose as high as 6,412.44 during afternoon trading before falls on Wall Street saw the index pull back and finish the day up 16.30 points at 6,395.37, bringing its gain for the year to 8.4pc and closing at a fresh five-year high. The mid-cap FTSE 250 (FTSE: ^FTMC - news) , which has a greater exposure to the UK economy, once again reached a record and climbed 84.99 to 13,739.94.
The blue-chip index rose despite shares in RSA Insurance (LSE: RSA.L - news) suffering a drop of 19.3 or 14.2pc to 117p. Investors took fright after the company announced a final dividend for 2012 of 3.9p a share, down from 5.82p in 2011, and said this year’s interim payout would fall. Panmure Gordon analyst Barrie Cornes cut his recommendation to “sell” from “hold”, noting the dividend had been “a key prop to the share price”.
Aviva (LSE: AV.L - news) ’s decline of 15.2 to 354p was collateral damage from the RSA disappointment. Some analysts have recently asked whether the insurer, which reports full-year numbers on March 7 and will update on its dividend, will lower its payout too.
Mining shares were out of favour. After announcing the departure of chief executive Marius Kloppers and posting lower first-half earnings, BHP Billiton fell 52½p to £21.83½. Anglo American (LSE: AAL.L - news) slid 44½p to £19.51 as Moody’s lowered its outlook on company’s credit rating to “negative” from “stable”. Moody’s said it cut its outlook because of the “high execution risk associated with key projects such as developing the Minas Rio project in Brazil and the restructuring of its platinum business”.
Barclays , trading without the right to its latest dividend, was hurt by heavyweight broker Goldman Sachs (NYSE: GS-PB - news) , which struck the bank from its “buy” list and cut its rating to “neutral”. Antony Jenkins, Barclays’ new chief executive, last week unveiled his restructuring plan for the high street bank.
“We consider it unlikely that the announced strategy resets market expectations of Barclays’ cost of capital or growth profile,” analysts at Goldman said. “Consequently, we expect any re-rating of the stock from here to be gradual tracking improvement in reported returns rather than front-loaded.”
Booking the biggest blue-chip gain was Rexam , up 25.3 at 502p on the release of the drink can maker’s 2012 results.
A rash of deal-making also appeared to impress. Blue-chip engineer Weir Group advanced 13p to £21.88 after the company said it spent £55m on three acquisitions, including a Canadian maker of wear-resistant linings used in the mining and oil sands sectors. Weir is using its existing bank facilities to fund the deals.
On the FTSE 250, PZ Cussons (LSE: PZC.L - news) - also trading ex-dividend - rose 15.05 to 408.9p on the back of its £46.6m disposal of its Polish home care brands. The sale “allows the company to focus solely on growing its personal are business in the region,” said analysts at Panmure.
Inchcape , 13 better at 517½p, had been busy too, announcing the £78m acquisition of Trivett, a luxury car dealer in Australia. The deal pleased analysts, with Investec (LSE: INVP.L - news) expert Bethany Hocking describing the acquisition as “a very good price for an attractive business”.
Meanwhile, the mid-cap housebuilders found support from an encouraging first-half earnings announcement from Galliford Try (LSE: GFRD.L - news) , up 7 at 905p. Barratt Developments put on 5.2 to 239p, and Taylor Wimpey (LSE: TW.L - news) added 1.55 to 79.05p.
Elsewhere on the FTSE 250, retailer Sports Direct lost 21 to 416p ahead of its trading update tomorrow. In the run-up to a key shareholder vote on Bumi (Other OTC: VLLRF - news) ’s future, also due tomorrow, shares in the troubled coal miner fell 16.7 to 379.3p.
Hochschild Mining (Other OTC: HCHDF - news) , a mid-tier company that digs for silver and gold, fell foul of a downgrade to “sell” from “neutral” at Citigroup (NYSE: C - news) . The broker cut its rating because of weakening silver prices, and the shares declined 26.3 to 400.6p, the heaviest loss in the FTSE 250. The price of gold also fell further today.
As usual, punters were paying attention to the London market’s various oil and gas plays. Range Resources leapt 0.48 - 10pc - to 5.28p. The group said an independent report had found that the Atzam 4 well in Guatemala, in which Range has a 28pc interest, had estimated probable reserves of 2.3m barrels of oil.
Kurdistan oil explorer Gulf Keystone Petroleum , a share tracked by many retail investors, dipped 1¼ to 197¾p. Although the Aim-listed group announced an oil discovery at its Bakrman-1 exploration well, the company also revealed its Bijell-3 well did not find commercial hydrocarbons and would be abandoned.