FTSE snaps 3-day losing run

Wed 20 Aug, 2008 19:28

LONDON (Reuters) - The top share index ended 1 percent higher on Wednesday, snapping a three-session losing run, as commodity stocks rallied on the back of firmer metal and crude prices.

The commodity-heavy FTSE 100 (UKX.L) closed up 51.4 points at 5,371.8, after losing 3.2 percent in the previous three sessions.

The UK benchmark is down nearly 17 percent for the year on recession fears as well as rising inflation concerns and the impact of credit-related losses on financial institutions.

"Commodities are seeing a bit of a bounce but I am still a bit cautious," said Tim Whitehead, head of portfolio services at Redmayne-Bentley.

"It's better to be sitting on your hands at the moment," he said, adding that volume was thin with many traders and fund managers were away on holiday.

Miners held onto earlier gains after metal prices eased in late trade. Rio Tinto (RIO.L), BHP Billiton (BLT.L), Xstrata (XTA.L), Anglo American (AAL.L) and Eurasian Natural Resources (ENRC.L) put on 1.9 to 7.4 percent.

Energy stocks also rose, with BP rising 0.7 percent, Royal Dutch Shell gaining 2.1 percent and BG Group up 4.4 percent, even though crude prices slipped in late session.

Oil explorer Tullow Oil (TLW.L) soared 6.8 percent after positive comments in research notes. UBS upgraded the stock to "buy" from "neutral" based on valuation and added that further exploration success could also make Tullow an M&A target.

Talks of China, one of the biggest metal and energy consumers, to introduce a stimulus package to jump-start growth also added a fillip to sentiment, with Asian stocks recovering from a two-year.

"There were concerns that after the Olympic Games some of the Chinese economy might start to drop off the cliff slightly but it looks very much like that isn't going to be the case," said Richard Hunter, head of UK equities at Hargreaves Lansdown.

"Underneath all that, trading volumes are very thin. The market is reasonably directionless, so you do get those slight swings in volatility."

In the UK, Bank of England minutes showed that policymakers were split three ways in August for a second month running, with one voting to hike interest rates, another to cut but the remaining seven deciding to keep borrowing costs steady at 5 percent.

Banks were mixed in a volatile session, with Barclays (BARC.L) and Royal Bank of Scotland (RBS.L) down. But Lloyds TSB (LLOY.L), HBOS (HBOS.L), HSBC (HSBA.L) and Standard Chartered (STAN.L) were up.

Barclays also traded ex-dividend.

BT Group , Carnival (CCL.L), Pearson , Schroders (SDR.L) , Scottish & Southern Energy (SSE.L) and Thomson Reuters (TRIL.L) also fell after going ex-dividend.

Sainsbury (SBRY.L) slipped 3.7 percent after JPMorgan cut its rating on the food retailer to "neutral" from "overweight".

BAE Systems lost 1.4 percent after the Times reported that the defence ministry had agreed a 2 billion pound contract to secure the future of Royal Ordnance, which is owned by Europe's biggest defence company.

Among high-flying midcaps, Michael Page (MPI.L) surged 9.3 percent to 360.75 pence following comments from the recruitment group's boss that a sale of the company to Adecco could be possible at 600 pence per share or more.

(Additional reporting by Michael Taylor; Editing by Paul Bolding).