FTSE continues to rise, despite BT’s stumble
The FTSE 100 continued to rise late on Tuesday, despite concerns at British Telecom (BT Group). BT fell by just short of 6% after negative feedback from Merrill Lynch on its plans for reform. The group had formulated a strategy to shed some of its current expenses while also boosting revenue, however the Bank of America felt this was unlikely to be successful and quickly pulled the plug on its 3 and a half year old ‘buy’ recommendation.
Merrill Lynch’s primary concerns were over the source of the revenue. BT Group is planning to expand on its internet service hardware, making its fibre optic services accessible to millions more homes in the UK. Additionally they also intend to acquire rights for live sporting events, to go hand in hand with its new TV service. However both of these revenue streams would require heavy investment, which Merrill Lynch believes they do not have the cash flow to complete. Additionally, their plans to cut costs would likely be met with protests as they have already cut their staffing levels by more than a fifth since 2008.
The FTSE as a whole however closed above 6,300. The rise came on the back of better than expected house prices data in the United States. The index closed at 6,339.19, a rise of 0.7%. This prompted many analysts to suggest that the index will continue its rally into February as the first month of the year saw the benchmark rise by more than 7.5%.
The day’s biggest fall from a blue chip was that of RBS, which saw its stock decline to 345.8p, a fall of 22p. The decline was attributed to negotiations coming towards a close with regulators on both sides of the Atlantic over last year’s Libor scandal, which RBS was alleged to have been a part of.
J Sainsbury made gains of 4.4p, continuing to benefit from news of a potential takeover earlier in the week. Pennon Group were also the subject of takeover speculation early in the day due to a sharp rise in trade volume, however it soon emerged that a director had decided to sell some 5,000 shares at just over £7 each.
