UK stock rallied this morning after Spain was granted a €100 bailout by the EU to shore up its struggling banks. The FTSE 100 stood at 5,465 in early afternoon, up 31 points (0.55 percent) from Friday’s close.
This was a smaller increase than expected as pre-market forecasts called for a surge of over 100 points. Gains in the blue chip index were curbed by concerns that the action taken by the EU may not be sufficient to keep Spain’s fiscal problems under control and prevent the euro zone’s fourth largest economy from asking for a full bailout.
“As with most co-ordinated policy efforts in the euro zone, they serve more to prevent a melt-down, rather than map-out a definitive pathway to the exits,” said chief economist at FXPro Simon Smith.
“The Spanish government are keen to point out that this is a bailout for the banks, not the government.
“But as with Greece (where it was the other way round), the interdependencies between the two are becoming ever closer and the bond market are right to be concerned about this.”
Asset management firm Schroders (LON:SDR, up 2.7pct at 1,263p) and builders’ merchant Wolseley (LON:WOS, up 2.5pct at 2,267p) topped the FTSE 100 leaderboard this afternoon.
Banks got a boost from the news about the Spanish bank bailout with taxpayer owned bank Lloyds (LON:LLOY, up 2.5pct at 28.7p) and Barclays (LON:BARC, up 1.7pct at 193.55p) emerging among the best performers in the top flight.
Investors also bought miners after China, currently the world’s largest consumer of base metals, said on Sunday that its oil, copper and iron ore imports rose in May, while its exports surged 15.3 percent last month, which was well ahead of expectations.
Antofagasta (LON:ANTO, up 2.5pct at 1,086p) was the top riser in the sector, followed by Anglo American (LON:AAL, up 1.4pct at 2,103p) and BHP Billiton (LON:BLT, up 1.3pct at 1,789.5p).
Other notable risers included Irish building materials group CRH (LON:CRH, up 2.4pct at 1,140p) and commodities trader Glencore (LON:GLEN, up 2pct at 365.1p), which today completed the acquisition of an 80.08 percent stake in Namibian zinc miner Rosh Pinah.
The mine produced 89,000 tonnes of zinc concentrate and 16,000 tons of lead concentrate in 2011.
Meanwhile, hedge fund manager Man Group (LON:EMG, down 1.6pct at 78.55p) slid to the bottom of the pile along with water group United Utilities (LON:UU., down 1pct at 674p), which is seen as a defensive stock.