Spain and US pull FTSE in two directions ; YESTERDAY IN THE CITY [Western Morning News (England)]
(Western Morning News (England) Via Acquire Media NewsEdge) London's leading shares index struggled to find direction yesterday after a round of poor economic data in the US pulled attention away from positive developments in the eurozone.
The FTSE 100 Index closed flat at 5744.6 points after the US Labor Department revealed 386,000 Americans filed for unemployment benefits last week - higher than City estimates. Elsewhere, US home sales fell 2.6% to 4.48 million in March, while the reading on a key business idex dipped in April, signalling a slowdown in manufacturing.
London's top flight had been ahead earlier in the session after the Spanish government issued 2.5 billion euros (Pounds 2 billion) of two and ten-year bonds at the top end of its targeted demand - showing that investors still have some confidence. But more significant gains were stifled as its ten-year bond yield was 5.7%, up from 5.3% at the last auction but down from 6% seen earlier this week, reflecting concerns over whether the new government can execute tough austerity measures during a recession.
The pound continued to rally against the US dollar and euro, at 1.60 and 1.22 respectively, amid ongoing expectations that the Bank of England is stepping back from further quantitative easing in the short term.
The mixed result at the Spanish auction was reflected in London's banking stocks, with Barclays and Royal Bank of Scotland dropping 1.9p to 212.3p and 0.6p to 23.8p respectively.
But much of the trading interest came outside the top flight after results from Debenhams and WH Smith and a blow for shareholders in Cable & Wireless Worldwide after potential bidder Tata Communications pulled its takeover interest. Shares in the telecoms firm slumped 8% or 3.1p to 34p as Tata's withdrawal left Vodafone as sole runner in the auction.
WH Smith delivered results in line with expectations, with trading profits up 3% to Pounds 74 million, but shares fell 19p to 528p as analysts questioned how much longer cost savings can offset sales pressure. Debenhams did better, rising 0.7p to 81.2p, after half-year profits rose 1.4% to Pounds 127.1m, slightly ahead of market expectations.
5744.6 The closing value of the FTSE, flat after losing earlier gains
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