FTSE rises as miners gain and euro hope pushes bank stock
STRONG miners and banks boosted Britain’s top shares yesterday, keeping the index on an upward tilt, underpinned by progress in tackling the Eurozone sovereign debt crisis and recent upbeat US data.
The mood, already elevated by hopes European leaders will unveil new measures to solve the crisis by the month’s end, was further lifted when Slovakian lawmakers said they would approve a plan to expand powers in the Eurozone rescue fund.
“As long as we continue towards a solution to the European sovereign debt crisis, and as long as we continue to see an improvement in terms of US economic data, it should be enough to encourage investors to take advantage of cheap valuations,” said Henk Potts, markets strategist at Barclays Wealth.
“The important thing is what we hear from the Fed later today. The expectation is that they’ll suggest that growth is likely to be better in the second half of the year than in the first half, but the risk still remains skewed to the downside.”
The FTSE 100 ended up 46.10 points, or 0.9 per cent, at 5,441.80, and has notched up gains of about 10 per cent since it struck lows a week ago.
Phil Roberts, chief European technical strategist at Barclays Capital, said there was likely more upside for the index, which may reach the March and June lows over the course of the next month, around the 5,600 mark.
Miners, led by ENRC and Antofagasta, which enjoyed respective gains of 7.4 per cent and 6.9 per cent, bounced back from a weaker start after disappointing results from US aluminium group Alcoa.
ENRC grabbed the top spot on the blue chip leader board as Deutsche Bank said it saw the firm’s recent deal to take up a $650m option to control Kazakh coal producer Shubarkol Komir as a boost for the company.
Silver and gold miner Fresnillo bucked the trend, off two per cent, after cutting full-year silver production guidance after output fell in the third quarter, as it reinforced safety conditions at all of its projects following the deaths of 10 workers.
Banks, beaten down this year on worries over exposure to the Eurozone crisis, rallied, with Barclays the standout gainer in the sector, up 6.4 per cent.
Traders attributed Barclays’ outperformance in part to a target price hike from Macquarie.
Societe Generale said it remained very upbeat on UK domestic banks, and reiterated “buy” recommendations on Royal Bank of Scotland, Lloyds Banking Group and Barclays, despite cutting target prices across the sector.
Sticking with financials, Man Group dropped six per cent, the top FTSE 100 faller, after the hedge fund firm said its flagship AHL fund fell 5.5 per cent last week.
Meanwhile, engineers were boosted, with IMI and Weir up 4.3 per cent and 3.7 per cent, as Berenberg Bank started its coverage on both firms with a “buy” rating.
Burberry was another good gainer, up 3.5 per cent, after the British luxury goods group issued a reassuring first-half trading update.
Ex-dividend factors knocked 2.7 points off the FTSE 100, with Capital Shopping Centres, Old Mutual, Smith & Nephew, Tesco, Wolseley and WPP Group all losing their payout attractions.