UK stocks rose sharply today with the FTSE 100 rallying 112 points (2.2 percent) to reach 5,277 in early afternoon, driven by speculation that Italy is due to receive a massive aid package from the International Monetary Fund (IMF).
A report in Italian newspaper La Stampa claims that the debt-ridden Italy and the IMF are in talks over a €600 billion loan, which should help the euro zone’s third largest economy service its €1.9 trillion debt pile and avert a default.
However, the IMF has already denied that any such negotiations are taking place.
Nevertheless, the FTSE 100 held on to its gains and showed no signs of weakness this afternoon.
“Less excitable voices were also heard to wearily point out that the IMF only has around €285 billion in emergency funds, meaning that IMF members would have to stump up lots more cash,” said analyst at IG Index Christopher Beauchamp.
“However, the voices of sanity have been ignored this morning, as the FTSE 100 looks to continue the remarkable turnaround that it started on Friday.”
The markets also shook off today’s report from the Organisation for Economic Co-operation and Development (OECD), which called on the EU to act swiftly to stem the debt crisis. If Europe fails to address its debt problems, OECD said it could face “massive escalation of economic disruption”.
Banking stocks were in demand as concerns over their exposure to the European debt crisis eased. Barclays (LON:BARC, up 6.4pct at 165.55p) topped the leaderboard, followed by part-nationalised bank Royal Bank of Scotland (LON:RBS, up 5.3pct at 19.73p).
Miners including Kazakhmys (LON:KAZ, up 4.9pct at 844.5p) and Vedanta Resources (LON:VED, up 4.8pct at 972.5p) also did well in morning trade as base metals surged.
Despite a sharp rise in the price of gold, Randgold Resources (LON:RRS, down 6.1pct at 6,365p) slid to the bottom of the FTSE 100 pile after warning investors that a series of setbacks at its Tongon mine in Côte d'Ivoire is expected to have a negative impact on its fourth quarter production.
US markets
Financial bookmakers are currently expecting US stocks to open sharply higher today. In addition to the reports of talks between the IMF and Italy, American stock markets were supported by upbeat US retail sales data that came out this morning.
Futures for the Dow Jones Industrial Average (DJIA) rallied 273 points (2.45 percent) and futures for the broader S&P 500 index advanced 34.5 points (3 percent).
Retail research company ShopperTrak reported that sales during the four day period starting on the Thanksgiving Day and including Black Friday jumped 16 percent compared to the same period of 2010.
While ShopperTrak estimated that Black Friday sales were up 6.6 percent, the National Retail Federation reported a 9.1 percent increase from a year earlier.
UK corporate news
Back in the UK, other corporate updates included a report from mining major Rio Tinto (LON:RIO, up 5pct at 3,181p), which said that customer sentiment has become more negative as a result of the euro zone debt crisis and a weaker outlook for the US economy.
“But while there are signs of nervousness, we believe the impact of current economic concerns on our business is manageable, unless financial markets substantially deteriorate,” said chief executive of Rio Tinto Tom Albanese.
Fellow mining company BHP Billiton (LON:BLT, up 5pct at 1,843p) today announced changes at the top. BHP said its chief financial officer Alex Vanselow will retire from the company at the end of February 2012 to be succeeded by Graham Kerr.
Kerr has recently served as president of its BHP’s Diamonds and Specialty Products business.
The group added that president of marketing Michael Henry will join the group management committee as group executive and chief marketing officer.
In other news in the top flight, Rolls-Royce (LON:RR., 2.6pct at 696p) rallied after announcing a longevity swap agreement with its pension fund that it said would “give additional security to all members of the company's final salary pension scheme.”
The contract with Deutsche Bank reduces the risk on approximately £3bn of the fund's liabilities, said Rolls-Royce.
“This is the latest in a series of measures we have taken to achieve greater certainty for our future funding requirements,” said finance director of Rolls-Royce Andrew Shilston.