Standard Chartered leads Britain's FTSE higher

Tue Feb 19, 2013 7:06am EST

* FTSE 100 index up 0.4 percent
    * StanChart adds 3.1 pct after M. Stanley recommendation
    * UK shares extend gains after strong German confidence data
    * Vodafone takes 8.4 points off index after downgrade

    By Alistair Smout
    LONDON, Feb 19 (Reuters) - Britain's blue chip shares rose
on Tuesday, led by gains in Standard Chartered after it was
upgraded by Morgan Stanley, and supported by a strong German
business sentiment survey.
    Standard Chartered jumped 2.9 percent, with traders
citing a note from Morgan Stanley which recommended switching
into the bank and out of the UK's other Asia-focused bank, HSBC
. 
    HSBC fell 0.4 percent, flouting the two banks' tendency to
move in tandem.
    "Earnings momentum and valuation are two reasons to prefer
Standard Chartered to HSBC right now," Simon Maughan, financial
sector strategist at Olivetree Securities, said.
    Although StanChart's share price correlation with HSBC over
the past two years is 70 percent, over the last year it has
fallen to 57 percent, he said.
    "HSBC has outperformed Standard, but that is irrelevant
without the additional catalysts (of valuation and earnings)."
    The FTSE 100 was up 22.77 points, or 0.4 percent, at
6,340.96 by 1126 GMT, with financials adding 10 points to the
index.
    The index added an extra 0.1 percent after the German ZEW
survey, a gauge of investor and analyst sentiment in Europe's
largest economy, came in well ahead of expectations.
    The Mannheim-based ZEW think-tank said on Tuesday its
monthly poll of economic sentiment rose to 48.2 points from 31.5
in January, beating even the highest expectation in a Reuters
poll with a median forecast for 35.0 points. 
    "The ZEW survey was a very good number. They seem to be
almost a quarter ahead of their data. The ZEW number has been
getting better even as the data has been getting worse," said
Will Hedden, sales trader at IG Index.
    Since breaking through the 6,200 level towards the end of
January, the FTSE 100 has been trading in a 200-point range for
three weeks.
    "We've been around these levels for a few weeks now, and
with a (ZEW) number like that, you'd be surprised to see these
gains evaporate," said Hedden.
    
    VODAFONE'S "STRUCTURAL DECLINE"
    Gains were broad-based, with all but two sectors
contributing to the index's advance. 
    The rise on the broader index came despite heavyweight
mobile telecoms firm Vodafone trimming 8.4 points off
the index and taking the telecom sector into negative territory.
    Its shares fell 2.6 percent after Bernstein cut its rating
on the stock to "underperform", highlighting concerns over
European operations.
    "Vodafone's European operations are in structural decline -
in the oversupplied and commoditised business of European
wireless Vodafone is neither the lowest-cost provider nor a
differentiated operator," Bernstein said in a note.
    InterContinental Hotels (IHG) also fell, losing 1.6
percent, after the hotel group reported results as investors
banked profits after the shares hit an all-time high in the
previous session.
    IHG, the world's biggest hotelier, posted an 11 percent rise
in 2012 operating profit, underpinned by strong U.S. growth and
expansion in developing markets. 
    Investec Securities, however, cut its rating on the company
to "hold" from "buy" following a 30 percent rally in IHG shares
over the last three months.

 (Additional reporting by David Brett; Editing by Susan Fenton)
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