London - Britain's blue chip shares rose on Tuesday, led by gains in Standard Chartered after it was upgraded by Morgan Stanley, and supported by a strong German business sentiment survey.
Standard Chartered jumped 2.9 percent, with traders citing a note from Morgan Stanley which recommended switching into the bank and out of the UK's other Asia-focused bank, HSBC.
HSBC fell 0.4 percent, flouting the two banks' tendency to move in tandem.
“Earnings momentum and valuation are two reasons to prefer Standard Chartered to HSBC right now,” Simon Maughan, financial sector strategist at Olivetree Securities, said.
Although StanChart's share price correlation with HSBC over the past two years is 70 percent, over the last year it has fallen to 57 percent, he said.
“HSBC has outperformed Standard, but that is irrelevant without the additional catalysts (of valuation and earnings).”
The FTSE 100 was up 22.77 points, or 0.4 percent, at 6,340.96 by 13:26 SA time, with financials adding 10 points to the index.
The index added an extra 0.1 percent after the German ZEW survey, a gauge of investor and analyst sentiment in Europe's
largest economy, came in well ahead of expectations.
The Mannheim-based ZEW think-tank said on Tuesday its monthly poll of economic sentiment rose to 48.2 points from 31.5
in January, beating even the highest expectation in a Reuters poll with a median forecast for 35.0 points.
“The ZEW survey was a very good number. They seem to be almost a quarter ahead of their data. The ZEW number has been getting better even as the data has been getting worse,” said Will Hedden, sales trader at IG Index.
Since breaking through the 6,200 level towards the end of January, the FTSE 100 has been trading in a 200-point range for
“We've been around these levels for a few weeks now, and with a (ZEW) number like that, you'd be surprised to see these gains evaporate,” said Hedden.
VODAFONE'S “STRUCTURAL DECLINE”
Gains were broad-based, with all but two sectors contributing to the index's advance.
The rise on the broader index came despite heavyweight mobile telecoms firm Vodafone trimming 8.4 points off the index and taking the telecom sector into negative territory.
Its shares fell 2.6 percent after Bernstein cut its rating on the stock to “underperform”, highlighting concerns over European operations.
“Vodafone's European operations are in structural decline - in the oversupplied and commoditised business of European wireless Vodafone is neither the lowest-cost provider nor a differentiated operator,” Bernstein said in a note.
InterContinental Hotels (IHG) also fell, losing 1.6 percent, after the hotel group reported results as investors banked profits after the shares hit an all-time high in the previous session.
IHG, the world's biggest hotelier, posted an 11 percent rise in 2012 operating profit, underpinned by strong US growth and expansion in developing markets.
Investec Securities, however, cut its rating on the company to “hold” from “buy” following a 30 percent rally in IHG shares over the last three months. - Reuters