UK stocks performed in line with pre-market expectations in morning trade with the FTSE 100 climbing 22 points (0.4 percent) to reach 5,244 in early afternoon, looking to snap a six day losing streak.
The markets shook off the disappointing results of today’s Spanish bond auction, which saw yields on the debt ridden country’s three and six month bonds top five percent.
The negative impact of the auction was offset by the news that the European Central Bank (ECB) spent nearly €8 billion on euro zone bonds, up from €4.48 billion in the previous seven days.
Bargain hunting also provided support for the market as traders bought into the cheap prices after the UK’s blue chip index fell to a six week low yesterday after Moody’s warned that further increases in borrowing costs could threaten the outlook on its top notch AAA rating.
In addition, it was reported that a bipartisan committee set up to agree on a plan to reduce the US deficit by US$1.2 trillion is set to meet the Wednesday deadline, leading to automatic cuts in budget spending.
However, Moody’s and fellow rating agency Standard & Poor’s told the markets that the anticipated failure of the “super committee” will not have an impact on America’s credit rating.
“There’s a fine balance between picking a bargain and a falling knife, so we think this is likely to keep markets range bound for some time, although when risky assets have heavy sell-offs as they did yesterday we are likely to see some buyers come in causing a short-term bounce before the next round of selling takes place,” said analyst at forex.com Kathleen Brooks.
Car insurer Admiral Group (LON:ADM, up 5.9pct at 864p), which was today identified among 43 stocks that pay dividends of over eight percent by HSBC, was the top performer in the top flight in morning trade.
Miners including Vedanta Resources (LON:VED, up 2.6pct at 972p) and Antofagasta (LON:ANTO, up 2.2pct at 1,031p) also did well as base metal prices rose.
The heaviest fallers included International Airlines Group (LON:AIG, down 5pct at 132p), which fell to the bottom of the FTSE 100 pile, and defence and aerospace group Meggitt (LON:MGGT, down 2.1pct at 376.8p).