FTSE bounces back after Greece defaults on IMF

Britain’s benchmark index bounced back on Wednesday from five-and-a-half month lows as Greece became the first developed country to miss a payment to the International Monetary Fund.

For the first time in five years, Greece is now without a financial lifeline and joins the defaulters club alongside Afghanistan, Cuba, Sudan, Somalia and Zimbabwe. After two consecutive days of losses, amounting to 3.5pc, the FTSE emerged relatively unscathed as the deadline for Greece to repay €1.6bn to the IMF came and went, as investors had expected.

Rebecca O’Keefe, of Interactive Investor, said “markets appear to be taking it in their stride, with equities higher”. On Wednesday morning, reports that Greek Prime Minister Alexis Tsipras had written to international creditors saying the country would accept the bail-out conditions that were on the table, requesting only a handful of minor changes, further boosted equity markets.

“Signs of capitulation from the Syriza government highlight the extent of the pressure that Greece is under,” Juliet Tennent, of Goodbody said. While some analysts noted the Greek government could call for a ‘yes’ vote in this Sunday’s referendum on its bail-out measures, this notion was quickly dispelled after Mr Tsipras appeared on Greek television, calling for a ‘no’ vote and reassuring Greek citizens he will not back down.

• Greece crisis live: Tsipras vows to go ahead with referendum as creditors pressure him to capitulate on bail-out deal

The fate of Greece’s membership in the single currency remains in the balance ahead of the referendum, when Greek citizens will vote on whether to accept the austerity terms of the international aid package. For the moment, markets remain in positive territory as investors await further developments in the coming days. The FTSE 100 closed in the green - 87.6 points, or 1.3pc, higher at 6,608.59. European bourses also rebounded with DAX and CAC recording gains of 2.2pc and 1.9pc, respectively.

The airline sector was among the best performers on the FTSE 100, after a government-appointed commission said Britain should build a third runway at Heathrow airport. Lower oil prices also lifted the sector, with easyJet jumping 37p, or 2.4pc, to £15.83, while International Consolidated Airlines Group rose 7.8p to 502.5p.

Betfair became one of the favourites on the FTSE 250 after a bullish note from Morgan Stanley drove the stock 88p higher to £24.94. Upgrading the stock to overweight, the bank said its sportsbook was nearly on par with that of rival Ladbrokes - describing it as “a resounding success”. Analysts were also keen to note the “hidden value” which casn be found in the United States, referencing New Jersey, in particular, where it has delivered market share gains in the gaming market. The share price has doubled in the last nine months, and Vaughan Lewis, of Morgan Stanley, said “the company has proven that its expansion into the mass market is working and the market is now somewhat pricing in ongoing market share gains”.

Meanwhile, AstraZeneca made healthy gains of 101.5p, or 2.5pc, to £41.21 even though draft guidelines from the US Food and Drug Administration on the company’s lung drug, Symbicort, raised the prospect of generic companies developing copies of the medicine. Alexandra Hauber, of UBS, warned sales of generics are now more likely in the next five years. “We currently project US Symbicort sales of $1.8bn in 2020, but that’s now at risk,” Ms Hauber added.

Serco Group also made great strides, becoming the FTSE 250 leader, reaffirming its profit and sales forecasts for the current year in its trading update. The mid-cap outsourcer said revenue for the year was likely to be in the region of £3.5bn, with profits of around £90m anticipated. Robin Speakman, of Shore Capital, described the trading statement as “encouraging”, but warned “Serco’s recovery remains a long term process”. Earlier this year, the company had warned it was unlikely to return to sales growth for another three years, after suffering a myriad of contract problems and scandals which strained its ties with the British government. The stock closed up 7.7p, or 6.5pc, at 125.7p.

• Questor share tip: Is Serco 12-year low a major buying signal?

Buoyed by a solid trading update, Tullow Oil inched 5.6p higher to 334.1p. The oil and gas producer raised its West African full-year production guidance, as it now anticipates it will produce between 66,000 and 70,000 barrels per day. James Thompson, of JP Morgan Cazenove, described the statement as “supportive”, adding it would “help the shares outperform its peers”.

Beating market expectations, British brewer Greene King reported a pre-tax profit of £168.5m, sending shares upward 7.5p to 852p. Douglas Jack, of Numis, said “the estate has benefited from the disposal of 314 pubs during the year” which helped average profits to rise by 15.5pc.

Zoopla Property plunged 7.1pc to 258.2 in afternoon trade after an erroneous tweet inferred short-seller Gotham City Research was planning on targeting it. However, Gotham City subsequently confirmed after markets closed it was Swiss-listed Myriad Group which it is short, believing “shares are worth less than $1”.

_{Zoopla Property fell 7.1pc on Wednesday (Source: Bloomberg)}

There was a flurry of activity among Aim-listed stocks. Shares in Sirius Minerals emerged from suspension, 43.3pc in the green at 21.5p, after the North York Moors National Park Authority gave it the go ahead to build its potash mine.

A private placing of $47.7m helped Tethys Petroleum push 4.1pc higher to 9.6p. The placing will allow the company, which has assets in Tajikistan and Kazakhstan, to accelerate its operations, productions and cash flow in Kazakhstan.

Cyber security group Sophos enjoyed its second day on the London Stock Exchange increasing 3.4pc to 242p following its £1bn IPO. Finally, shares in AA were driven 3.7pc higher to 384.4p on the back of plans to launch a joint venture in India as it attempts to tap into the roadside assistance market there.