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FTSE outperforms as mining shares hit four-month high

Published 04/03/2016, 17:09
© Reuters. A man shelters under an umbrella as he walks past the London Stock Exchange
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By Atul Prakash and Kit Rees

LONDON (Reuters) - Britain's mining index climbed to a four-month high on Friday, boosted by a rally in the prices of major industrial metals.

Glencore (L:GLEN), Anglo American (L:AAL), BHP Billiton (L:BLT), Antofagasta (L:ANTO) and Rio Tinto (L:RIO) rose by 5.9 to 11.9 percent.

They helped the index (FTNMX1770) surge 8.1 percent, taking 2016 gains to 31 percent as copper prices climbed to their highest in nearly four months on Friday. [MET/L].

"Miners are having a great run as some investors believe that stronger metals prices may change the fate of the basic resources sector," said Securequity senior trader, Jawaid Afsar.

"However, the sector remains vulnerable in the near term as the recent rally may prompt some people to book profits."

The advance by mining shares helped the blue-chip FTSE 100 (FTSE) to close 1.1 percent higher at 6,199.43 points, outperforming the broader European market.

The index also benefitted from a surge in U.S. nonfarm payrolls, a sign of labour market strength that could further ease fears the economy might be heading into recession.

Nonfarm payrolls increased by 242,000 jobs last month and the unemployment rate held at an eight-year low of 4.9 percent even though more people joined the labour market.

Investors, however, were cautious about the data, citing weaker earnings numbers as a cause for concern.

"It's all well and good jobs increasing on an almost month-on-month basis, but if hourly earnings aren't going up, and if ... the unemployment rate is fairly steady, then I don't think there's too much scope for the Federal Reserve to be able to hike interest rates in the near term," said Manoj Ladwa, head of trading at TJM Partners.

The UK stock index has surged more than 12 percent since hitting a multi-year low last month. It has now posted its third week of straight gains for the first time in 2016.

Among the gains was budget airline easyJet (L:EZJ), which rose 4.5 percent after saying passenger numbers rose 9.8 percent in February.

But asset manager Schroders (L:SDR) was down 4.2 percent after Citigroup (NYSE:C) downgraded it to "neutral" from "buy", citing challenging markets and the company's comments on future investment.

© Reuters. A man shelters under an umbrella as he walks past the London Stock Exchange

Builders' merchant Travis Perkins (L:TPK) fell 3.6 percent after investment bank Deutsche Bank (DE:DBKGn) and brokerage Stifel cut their price targets for the stocks.

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