Banks were the clear winners on Wall Street today, helping the Dow recover from yesterday’s losses after Bank of America surged 7.47%, following news it has raised $13.5 billion in capital through the sale of shares. Miners, led by Alcoa, rose higher too after oil prices touched a six-month high ahead of the crude oil inventories report in the US this morning.
At 3pm (London time) the Dow was up 92.63 points (1.09%) to 8567.48 while the S&P 500 had risen 14.06 points (1.55%) to 922.19. BoA climbed to $12.09 after it said it has successfully raised $13.5 billion by selling 1.25 billion shares at an average price of $10.77 each. [1] BoA decided to raise capital after the recent banking sector stress test revealed the company would need additional cash in order to survive the recession.
Rival Citigroup rose 4.24% to $3.93 while American Express was 2.58% higher at $25.43. Other gainers on Wall Street included General Motors and General Electric, both of which were up 6.3% and 3.5% to $1.35% and $14.18 respectively.
In the mining sector, Alcoa rose 3.93% to $10.06 after oil prices touched a six-month high in anticipation that the Energy Department’s weekly crude inventories report will show a drop of 400,000 barrels in stock piles in the week ending 15 May from the previous week’s 19-year-high figure of 370.6 million, according to a survey of 12 analysts polled by Bloomberg.
As a result, Brent crude oil futures rose 0.75% to $59.36 a barrel while US crude climbed 1.10% to $60.76 a barrel.
Back on the Dow Jones, losers included Hewlett-Packard, down 3.91% to $35.15; Home Depot, down 0.53% to $24.50; Pfizer, which fell 0.25% to $15.06 and Coca Cola, down 0.02% to $46.63.
At home, the FTSE 100 was led higher by the mining sector, with Lonmin, Fresnillo, Rio Tinto, Vedanta Resources and Petrofac all up between 3.6% and 9.56% at 3.05pm (London time). Among losers, Sainsbury’s slipped 5.06% to 328.5p, while rival retailer Marks & Spencer slid 3.53% to 300.75p. Other poor performers included Home Retail Group, Lloyds Banking Group and Man Group, all down between 3.64% and 4.57% at 3.05pm (London time).
In economic news, the Bank of England released minutes from its last rate-setting meeting this morning. The minutes revealed that policy makers voted unanimously this month to print another £50 billion ($78 billion) after an initial debate on whether to increase the amount even higher.
‘For some members, a case could be made for a larger stimulus. But as the precise amount that would ultimately be required was so uncertain, there was no pressing need for the larger extension at this meeting,’ Bloomberg News quoted the minutes as saying today.
Looking ahead, it may be worth keeping an eye out for the release of minutes from the FOMC’s last interest-rate meeting, which will be published in the US later today.
[1] Source: Bloomberg News (20 May 2009)
By Anthony Grech, Research Analyst, IG Index.
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