Britain's leading share index rose on Friday, recovering after sharp falls in the previous session, with financial stocks bouncing back led by Royal Bank of Scotland after its H1 results offered some comfort for hard-pressed investors.
RBS was the top blue chip gainer, rallying 4.7 percent following hefty falls in the previous session, as the part-nationalised bank rounded off the UK banks first-half reporting season with broadly in-line numbers, posting a first half operating profit of 1.83 billion pounds, down from 1.97 billion the year before, broadly in line with expectations.
The bank, which is 82 percent-owned by the government, also confirmed it has dismissed a number of employees for misconduct as a result of its investigations into the Libor interest rate rigging scandal and, along with other banks, is still under investigation by regulators.
“Given all of the distractions, the fact that RBS continues to edge in the right direction at all is of some comfort to investors,” Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers said in a note.
“For the moment, there remains much to be done, during which time the market consensus of a hold is unlikely to be disturbed in either direction,” Hunter added.
RBS was among Thomson Reuters StarMine's lowest ranked companies for earnings quality in the FTSE 100, with a score of 15 out of 100 prior to the release of these results, compared with the sector median of 39.
That means its earnings growth is expected to be difficult to sustain over the next 12 months based on what has contributed to those earnings in the recent past.
Volume in RBS shares was solid, at 42.7 percent of the 90-day daily average after an hour and 15 minutes of trading.
At 10:21 SA time, the FTSE 100 was up 45.13 points, or 0.8 percent at 5,707.33, recapuring the 5,700 level surrendered following a 0.9 percent slide on Thursday which came after the European Central Bank failed to deliver widely expected stimulus measures to help tackle the euro zone debt crisis.
Investors in London shrugged aside that ECB disappointment on Friday to focus on hopes that July's US jobs data, due at 14:30 SA time, could prompt the US Federal Reserve to launch further stimulus measures if they miss forecasts.
“There might be a feeling that maybe the move yesterday on the ECB was overdone - I think we're getting a bit of a relief off that, and as we've seen with the jobs figures in recent months, whatever happens, the market tends to view it as good,” David Jones, chief market strategist at IG Index said.
US non-farm payrolls are forecast to rise by 100,000 in July, after an 80,000 increase in June, with the unemployment rate seen static at 8.2 percent.
“If we get a good number, it shows the economy's maybe better than we thought. If we get a bad number, then people think it's going to force the Fed's hand to do more QE,” IG Group's Jones added.
IAG PAIN
International Airlines Group was by far the biggest FTSE 100 faller, dropping 3.9 percent as Europe's fourth-biggest airline group by market value - formed by the merger of British Airways and Iberia - cut its full-year profit guidance citing a poor performance from its Spanish unit and rising fuel costs.
The guidance cut came as IAG reported an operating loss of 253 million euros ($307.6 million) in the six months to the end of June compared to a profit of 88 million euros in the same period a year ago
“The statement indicates deep, structural problems at Iberia and a restructuring plan is anticipated to be finalised by the end of September. We await further details about this on the conference call but it is clear that IAG as a stock will struggle until more clarity is reached on its troubled Iberia division,” Davy Stockbrokers said in a note.
Volume in IAG shares was strong, with the stock having traded over 57 percent of its 90-day daily average by 10:21 SA time, while overall volume for the FTSE 100 index was moderate at 9.8 percent of the 90-day daily average. - Reuters