Britain's FTSE boosted by Barclays, hopes for ECB action in June

Thu May 8, 2014 11:21am EDT

* FTSE 100 index rises 0.5 percent
    * Draghi says ECB poised to shore up economy as soon as June
    * Barclays gains on bold revival plan

    By Tricia Wright
    LONDON, May 8 (Reuters) - Britain's top shares neared
nine-week highs on Thursday led by Barclays after it announced a
revival plan, while investors also welcomed the possibility of
more stimulus steps from the European Central Bank in June.
    Barclays was the standout gainer on the FTSE 100
, up 8.3 percent after it said it would cut 19,000 jobs
in the next three years and set up a "bad bank". 
    "Barclays' significant restructuring to simplify the group
is welcomed by investors...even if it means the flagship
investment banking division, which has driven things for so
long, needs scaling back," said Mike van Dulken, head of
research at Accendo Markets.  
    Strong full-year results lifted BT Group by 2.5
percent, and together Barclays and BT added most points to the
FTSE 100, up 32.26 points or 0.5 percent at 6,828.70 by
1459 GMT, within sight of levels last seen in late February.
    Brightening the mood, the ECB, which is trying to counter
the risk of low inflation in the euro zone, kept rates on hold
but president Mario Draghi said the council could act next month
when its staff forecasts are published. 
    CMC Markets senior market analyst Michael Hewson saw scope
for the UK benchmark to retest 6,875 - the 2013 high - or even
6,900.
    "There is potential for further gains simply because... if
the inflation data continues to show no signs of improving, the
likelihood is that the market will try and front-run a rate cut
or some form of action in June," Hewson said.
    The broader market's advance was capped by sharp falls in
some shares. Sage Group fell 5.6 percent as Chief
Executive Guy Berruyer said he would step down, and its results
disappointed some investors. 
    Equity markets have been buoyed in recent weeks by a burst
of deal-making and bids, offsetting concerns about a lacklustre
corporate earnings season. 
    With valuations for the UK equities not far above their
long-term average, some analysts are bullish. The FTSE 100 index
trades on a 12-month forward rice/earnings ratio of 13.5 times,
against its 10-year average of 11.8 times, Thomson Reuters
Datastream shows. 
    Ashish Misra, head of investment policy at Lloyds Bank
Private Banking, reckoned on getting about 10 percent total
return from UK equities over the next year, a figure comprising
continued earnings growth at about 7 percent and a dividend
yield of about 3 percent.
    "There aren't too many asset classes that we look at in
global markets which are offering that sort of attractive
double-digit return over a 12-month window," he said. "I'm less
concerned about the shorter-term noise." 

 (Additional reporting by Atul Prakash; Editing by Hugh Lawson)