By Michael Taylor
LONDON, March 18 (Reuters) - Britain's FTSE 100 <>
index surged 2.6 percent by midday on Tuesday as hopes of a
chunky U.S. rate cut lifted shares and helped banks rebound from
steep falls on Monday after the Bear Stearns <BSC.N> firesale.
At 1202 GMT, the blue-chip index was 142.8 points higher at
5,557.2 after the FTSE 100 hit its lowest closing level since
late 2005 on Monday.
Overnight, the Dow Jones industrials index <> rose after
JPMorgan Chase & Co's <JPM.N> deal to buy struggling brokerage
Bear Stearns at a rock bottom price for $2 per share.
UK banking and financials benefited most from the positive
sentiment, accounting for over 42 index points. Among individual
stocks, Barclays <BARC.L>, HSBC <HSBA.L> and HBOS <HBOS.L> added
between 3.8 and 5.6 percent.
But investors had one eye firmly on the U.S. Federal
Reserve, which is expected to deliver one of the steepest
interest rate cuts since 1982 after the market close in an
attempt to boost turbulent credit markets.
"You can't make an intelligent, forward conviction because
you just don't know (what lies ahead)," Richard Cunningham,
analyst at City Index Advisory said. "That said, I suspect we
may push ahead a bit further from here over the next few
days...some of these stocks have been significantly oversold."
"I suspect they (Fed) will do a full 100 basis points.
Depending on the rhetoric that's going to come out, that's not
necessarily going to surprise markets... it would be surprising
if speculators would want to go home short of equities ahead of
the Fed meeting."
A 100 basis point cut would leave U.S. rates at 2 percent.
In other stocks, hedge fund Man Group <EMG.L> rose 4
percent, rebounding from their 10 percent drop in the previous
session when its 18.6-percent-held affiliate MF Global <MF.N>
dived more than 60 percent on speculation the broker of
exchange-listed futures and options may have liquidity problems.
Citi said in a note that the slide in Man Group shares
presented a buying opportunity.
Insurers were also higher with Old Mutual <OML.L> climbing
3.1 percent and Prudential <PRU.L> tacking on 3.6 percent.
Legal & General <LGEN.L> reversed earlier falls, to trade up
2.3 percent despite saying its 2007 profit fell 26 percent,
missing analysts' expectations after making a 269 million pound
charge to account for Britons living longer. []
"These results are unlikely to rock the market but are
robust nonetheless," Collins Stewart analyst Tim Young said.
Mining shares were mixed as Rio Tinto <RIO.L> advanced 2.3
percent. Chinese aluminium giant Chinalco, which this year led a
$14 billion investment in Rio, is more likely to raise its stake
than reduce it, its president said on Tuesday. []
Kazakhmys <KAZ.L> lost 1.4 percent.
Europe's biggest travel firm TUI Travel <TT.L> was 6 percent
ahead after it said its key summer holiday bookings remained
strong across the group and it was on track to hit 2008 profit
forecasts and merger cost-saving targets. []
Thomas Cook <TCG.L> was up 4.3 percent.
Drugmaker Shire <SHP.L> rose as much as 9.9 percent after
UBS issued a report saying AstraZeneca <AZN.L> could afford to
pay 1,425 pence per share for Shire.
Shire has risen sharply in the past two sessions on market
talk of a possible bid from Pfizer <PFE.N>. AstraZeneca shares
gained 0.9 percent.
(Additional reporting by Dominic Lau)
(Editing by David Cowell)
