By Sarah Turner
LONDON (Dow Jones)--Banks helped British shares to notch gains
on Thursday, with HSBC Holdings among the best performers, amid
continued optimism for economic trends.
Overall, the U.K FTSE 100 index climbed 0.56% to 4,461.87. Other
European shares and U.S. stocks were also modestly higher.
The FTSE 100 has risen 29% since March 9 as investors started to
react to signs that the economy may have past the worst point.
"The stock market's strong rally reflects growing expectations
of an economic recovery," said Ben Wallace, manager of the Gartmore
U.K. Absolute Return Fund.
Banks, which are seen as leveraged to an improving economic
backdrop, have been at the forefront of the advance and rose again
on Thursday.
Shares of HSBC Holdings (HBC) climbed 2.3%, Royal Bank of
Scotland shares rose 4.7% and Barclays (BCS) shares advanced
5.5%.
Wallace also said that, as the credit crisis feeds through to
unemployment and the broader economy, the market may find it
difficult to advance much further and favors large-cap companies
with genuinely defensive characteristics.
Drugmakers are viewed as defensive and were also firm in London,
with shares of pharmaceutical giant GlaxoSmithKline (GSK) up
2.6%.
Morgan Stanley upgraded the firm to equalweight from
underweight.
The broker said that, following 12% underperformance
year-to-date for the shares compared to the European pharmaceutical
sector, it can no longer justify an underweight rating.
At the same time it raised its sector view to attractive, saying
it believes current valuations capture both near-term U.S.
political uncertainty and growing economic pressure.
Amec, Tomkins in focus
Shares of engineering group Amec rose 1.5%.
It has made an offer to acquire Australia's GRD but added that
the proposal is conditional on a number of things, including the
completion of due diligence. The statement came after GRD said it
had received an approach from Amec valued at A$105.8 million
(US$84.7 million).
Tomkins shares rose 4% outside the top index after it was
upgraded to buy from neutral at Goldman Sachs, as the broker
upgraded the European capital-goods sector to attractive from
neutral.
The broker said that despite the recent rally, current share
prices offer an attractive entry point into the sector.
"Leading indicators suggest a stabilization of the global
business cycle, and our economists' 2010 global GDP growth
forecasts are above consensus," the broker said.
The broker also upgraded Invensys , up 5.5%, to buy from
neutral.
On the downside, shares of property firm Shaftesbury fell 2.8%
to 300 pence after shareholder Laxey said that it would place 25.7
million shares, or 19% of the company's share capital.
On Wednesday, the Financial Times reported that Laxey was
reviewing its stake after Shaftesbury asked investors for
additional funds last month. The paper said that the stake was
valued at 130 million pounds ($212 million).
Services Desk; Dow Jones Newswires; +44-20-7842-9319/9274