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FTSE inches up, G20 settles nerves, banks weak

Published 09/25/2009, 04:38 AM
Updated 09/25/2009, 04:42 AM

* Energy stocks gain as crude prices stabilise

* Banks weaken, capital raising talk cited * G20 calms jitters but investors still cautious

By Simon Falush

LONDON, Sept 25 (Reuters) - Britain's leading share index was up 0.1 percent early on Friday, as a pledge by world leaders to keep emergency economic support in place until a recovery is more evident helped lift energy stocks, offsetting weaker banks.

By 0830 GMT the FTSE 100 index was 7.06 points higher at 5,086.33 after it closed 60.10 points lower on Thursday at 5,079.27, finishing back below 5,100 for the first time in over a week.

Leaders of the Group of 20 major industrialised and developing countries pledged to keep emergency economic supports in place until a durable recovery is secured, and to work together when the time comes to remove them.

This helped dispel concerns that a removal of government stimuli would snuff out the nascent recovery which has helped lift the FTSE 100 by 47 percent since touching a six-year trough in March. Commodity stocks were bolstered as fresh confidence in the demand outlook lifted metal and crude prices.

BP, Royal Dutch Shell, BG Group, Tullow Oil and Cairn Energy added between 0.4 and 1.4 percent.

"Investors will take some succour that the stimulus from central banks is still going to be there and that it will support local economies," said Richard Hunter, head of equities at broker Hargreaves Lansdown.

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However, investors were still cautious and gains were muted.

"There's a worry that the market has moved too far, too fast and we're at a crossroads ahead of Q3 (company) results to see how strong and sustainable the recovery is," Hunter said.

Eurasian Natural Resources, slipped 1.8 percent, the top blue-chip faller, after Central African Mining & Exploration (CAMEC) which has accepted a $955 million takeover from ENRC swung to an annual loss of $343.1 million.

Oil services firm Petrofac retreated 3 percent after broker downgrades by Banc of America-Merrill Lynch and Goldman Sachs on a bearish outlook for the oil support services sector.

BANKS WEAKER

Banks were weaker, with Lloyds Banking Group down 2.4 percent as analysts cited the possible need for another capital raising.

"There's a lot of noise on rights issues to come... and we're in a logical phase of consolidation after the very material gains since March," said Jonathan Lawlor head of European research at Fox-Pitt, Kelton.

The UK banking index is up 172 percent since a March low.

Barclays and Standard Chartered fell 0.8 and 1.3 percent respectively.

Private equity group 3i, was also weaker, down 3.2 percent, adding to losses the previous session when it doused hopes that the stock market rally would quickly feed through to the value of its assets.

A raft of U.S. data was due later in the session, namely August durable goods orders, new home sales and the final September reading for the University of Michigan consumer sentiment index. (Editing by Greg Mahlich)

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