FTSE rebounds, banks cheer Cyprus bailout.
Cyprus secured the 10 billion euro ($13.00 billion) rescue from international lenders overnight, in exchange for shutting down its second-biggest bank, spelling heavy losses for big depositors but, crucially, sticking to EU guarantees and protecting deposits of less than 100,000 euros.
The news bolstered bank shares across Europe, which had sold off sharply last week on concerns that any break of EU guarantees in Cyprus could undermine the confidence of depositors in other euro zone countries, sparking capital flight. The FTSE 350 banking index added 1.4%, clawing back some of last week's 4.1% slide, which was the sector's worst weekly showing in 10 months.
The blue chip FTSE 100 index was up 53.23 points, or 0.8%, at 6,445.99. It broke through minor technical resistance at the 20- and 30-day moving averages and edged back towards a five-year high of 6,533.99 points set earlier this month.
The UK benchmark also got a boost from a 3.1% rise in Vodafone, the fourth biggest company in the index.
It was boosted by renewed speculation the telecoms company could be working towards a deal to either sell its 45% stake in Verizon Wireless in the U.S., or merge itself with the Wireless unit's co-parent Verizon.
However, with FTSE 100 investors sitting on gains of 1.3% for March and 9.3% since the start of the year, traders said they expected profit taking ahead of a four-day Easter weekend with Thursday the final trading day of the quarter.
"We've had a bit of a rally on the Cyprus story, all the UK banks are up 2%-plus on the news ... It gives the market a bit more clarity but I think there will be a cap on how far we can go on this," said Adam Seagrave, equity trader at Saxo Bank.
In contrast, euro zone blue chips are up just 3% this year and investors in euro zone markets may be more inclined than London investors to stay in the market ahead of the quarter-end in the hope of boosting quarterly performance, by "window dressing".
Beyond any potential jitters this week though, technical charts pointed to more gains for the FTSE 100, pushing the index back above the four-month uptrend line.
"The logical level is the 2007 highs at 6,750. We've just had another absorption of bad news and it (the up-trend) is still very much intact," said Dominic Hawker, technical strategist at Westhouse Securities.
"The market at the moment is in a very broadly based up-trend, the only really weak sector is still the miners - there are layers of support around here but they certainly lack momentum. They are the only ones really failing to participate in the rally." Mining shares are being held down by shaky metals prices, structural problems in the sector and concerns about demand from China.
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|Publication:||Financial Mirror (Cyprus)|
|Date:||Mar 25, 2013|
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