FTSE races to record highs as CRH climbs

By Sudip Kar-Gupta

LONDON (Reuters) – Britain’s top share index hit record highs on Friday, moving above 7,000 points for the first time in its history.

The blue-chip FTSE 100 index (.FTSE) rose 0.8 percent to 7,017.42 points going into the close of the trading session, led by cement firm CRH (CRH.L), which surged on expectations of lucrative European asset purchases.

Retail investors often use the fact that a stock market has risen above such key levels as a sign that a bull market has momentum. Germany’s DAX (.GDAXI), for example, has advanced past 12,000 points to set record highs this year.

European stock markets have been buoyed by a bond-buying programme from the European Central Bank (ECB) — known as quantitative easing (QE) — that is aimed at boosting growth in the European economy.

Record low interest rates from major world central banks have also pushed down returns on bonds and cash, driving investors to the better returns from shares.

“With a backdrop of easing monetary policy continuing in the U.S. and with the ECB embarking on a 1 trillion-euro QE programme, it was inevitable the FTSE would get past the 7,000 mark,” said Dafydd Davies, a partner at Charles Hanover Investments.

CRH advanced 5.9 percent, adding 3.3 points to the FTSE and making it the best-performing FTSE stock in percentage terms, after Holcim (HOLN.VX) and Lafarge (LAFP.PA) salvaged a planned multi-billion-euro merger to create the world’s biggest cement company.

CRH has agreed to buy 6.5 billion euros worth of their assets, which would give antitrust clearance for the Holcim-Lafarge deal. The new assets would transform CRH into the world’s third- biggest building materials supplier.

“The huge sums you speak of could be seen as a negative for the stock, but in this instance and especially given the positive outcome of the Lafarge-Holcim situation, the acquisitions will indeed strengthen CRH’s position,” Accendo Markets’ analyst Augustin Eden said.

British bank TSB (TSB.L) — which is not in the main FTSE 100 index — also rose 2.1 percent after agreeing to a 1.7 billion-pound takeover by Spanish lender Banco Sabadell (SABE.MC) in one of the biggest cross-border banking deals since the financial crisis of 2007-09.

“In all, the news looks good for both UK consumers and businesses, with the new TSB adding competitive vigour to the UK market place,” said Keith Bowman, a Hargreaves Lansdown Stockbrokers equity analyst.

Lloyds (LLOY.L), ordered to sell TSB by regulators as a condition of its 20 billion-pound bailout during the financial crisis, said it had agreed to sell a 9.99 percent stake to Sabadell and had also undertaken to sell its remaining 40.01 percent.

(Additional reporting by Atul Prakash; Editing by Larry King)