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UK stocks bounce back from opening weakness 8211 UK GDP unrevised

Article By: ,  Financial Analyst
May 25, 2011 6:26 PM

The FTSE 100 opened down nearly 1% on Wednesday but managed to stage a recovery in the first few hours of the session to trade into positive territory by 10 points, led by gains in the UK banking sector.

There remains a fair degree of negative and concerned sentiment in the markets regarding the European sovereign debt situation and what may be down the road for not just Greece, but also Spain, Portugal and Italy. This caution was brought further to the forefront of investors’ minds by Moody’s statement yesterday that a Greek default is likely impact credit ratings of peripheral eurozone states and this continues to limit the buying activity we have seen for stocks.

Banking sector rallies hit a new 10-month low
From a sector perspective, we have the banks leading the charge in London, with the sector rallying 1%. The key UK banks have seen some bargain hunting, having started the session weaker. At the start to trading the UK banking sector hit a new 10-month low and has seen prices fall 20% since the middle of February on deep concerns about stricter regulations hampering profitability and exposures to sovereign debt.

Today’s rally is nothing to get too excited about as of yet and traders will want to see a consistent higher close throughout the week to convince that UK banks may be due a bounce back in prices in the longer term. Barclays has seen the most gains amongst UK banks this morning, with the company’s shares rallying some 1.9% to trade near the top of the FTSE 100 leader board.

Cable and Wireless Communications shares fall 8.6% after earnings
Shares in Cable and Wireless Communications fell over 8% in trading today after the telecom firm told shareholders it saw no recovery in its Caribbean markets for the year ahead, an area that is of high importance to the group. The firm also reported that core earnings would be lower than most analysts expected, coming in between $180 million and $210 million for 2011-2012.

UK Q2 GDP unrevised at 0.5% 
Data from the Office of National Statistics showed that a second reading of UK Q2 GDP was unrevised at a growth of 0.5%, in line with market expectations. The second reading showed a sharp fall in household spending, which fell 0.6%, the biggest fall in household spending for two years and reaffirms the challenges that high street retailers are facing.

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