Lloyds and Barclays soar as central banks' intervention lifts equities

FTSE: 5,337.54 (+110.52) Mid-250: 10,324.08 (+216.21) Small Cap: 2,930.40 (+39.79)THE FTSE 100 rose fast yesterday after five of the world's central banks announced co-ordinated action to provide dollar liquidity to the global financial system until the year-end.

The news soothed worries in the market about immediate-term financing difficulties faced by banks in the euro zone, sparked by worries of increased counter-party risk in the context of fears about contagion in the sector from its exposure to the Greek fiscal crisis.

London’s benchmark index rose 135 points in reaction to the news.

Lloyds Banking moved straight to the top of the leaderboard, gaining 7.3 per cent to 36p.

Barclays was in second place, up 5.9 per cent at 161p.

As risk appetite was restored across global markets, London’s heavily weighted resource stocks added their significant influence to the rally. Xstrata was the best single riser among miners, up 5.8 per cent at £10.55.

Kingfisher set an upbeat tone earlier in the session after the home improvement retailer’s interim results beat forecasts.

The owner of the BQ outlets in the UK and France’s Castorama chain reported a 24 per cent rise in first-half profits of £439 million. It also said it planned to create 1,200 jobs in the UK as part of plans to expand in its home markets. Its shares rose 4.8 per cent to 251p.

Philip Dorgan, analyst at Panmure Gordon, called Kingfishers results “excellent”, adding: “We think that Kingfisher shares have significant upside, driven by cash generation, earnings growth and multiple expansion.”

However David Jeary, analyst at Investec, sounded a note of caution. “While these results will be seen as reassuring by the market, we remain wary of two potential threats. Firstly, further euro weakness would dilute translation of euro denominated profits, principally from France, the group’s most important country market.

“Secondly, any adverse impact on French consumer confidence from the euro zone debt crisis would undermine growth prospects in Kingfisher’s principal market.”

Nonetheless, the news kept high street stocks at the top of the market, extending gains after well-received numbers from Next over the previous session. The fashion retailer rose 2.3 per cent to £25.41. Burberry was 2.7 per cent higher at £14.04 and Tesco gained 2.1 per cent to 373½p. – (Copyright The Financial Times Limited 2011)