UK stocks higher on German sentiment data HSBC pays record fine

Despite a slight decline at the start of the day the FTSE quickly used positive news in Europe to support it higher. European markets in general added further gains as investors found confidence in better than expected German investor sentiment and also watched the US budget negotiations keenly.

The German ZEW Institute’s economic sentiment index increased 6.9 points, from -15.7 to -11.5. This increase in sentiment could have been due to recent strong data from the US and the general feeling that the global economy is picking up again. However, it is important to point out that Germany and Europe only recently had their outlook for growth cut so it is still unlikely that we will see the German economy swing upwards over the next six months.

Elsewhere in Europe the Spanish Treasury has managed to auction off 3.89bn euro of short term bills at a lower yield than previously. This indicates that the market still feels comfortable with the backstop that ECB President Draghi has placed and confidence in Spain’s ability to pays it debt is improving.

Across the Atlantic, Democrats and Republicans are making progress in agreeing on a deal for fiscal cliff talks. The optimism has helped push markets higher and the FTSE hit a nine-month high by mid morning at 5935.

Looking at UK equities, HSBC have agreed to pay a record $1.92bn fine to settle the case against US prosecutors who have accused Europe’s biggest bank of failing to enforce rules and controls to prevent the laundering of criminal cash. The bank has made a statement that they are profoundly sorry for their past mistakes, however were keen to highlight that they are a fundamentally different organisation today than from the one that made those errors. HSBC lost 0.3% in early trading, however, by mid morning had regained lost ground and was trading up 0.5.

Standard Chartered also agreed a separate fine with the US regulators following an investigation into their business activities, they agreed to pay £203.4 million to resolve the allegations and have slipped 0.2%. Other banks also put pressure on the FTSE.

Tullow oil was the biggest faller on the FTSE 100, down over 5.5% after revealing disappointing results from wells in Ghana and Guyana. It also announced that it plans to exit the UK North Sea and buy Norwegian oil explorer Spring Energy in a deal worth up to £418.1m. The explorer had its target price cut by Bernstein and Barclays to 1830p and 1845p respectively. It is currently trading at 1185p.