Miners and banks lift FTSE 1.4 percent

Wed 04 Nov, 2009 17:03

By Jon Hopkins

LONDON (Reuters) - Leading shares ended 1.4 percent higher on Wednesday boosted by a rebound from miners and banks, with retailers Next and Marks & Spencer (MKS.L) also higher after posting forecast-beating figures.

At the close, the FTSE 100 (UKX.L) was up 70.68 points at 5,107.89, recouping all of Tuesday's losses when the index fell 1.3 percent to its lowest closing level in a month.

"Tuesday's fall looked to have been overdone, and shares have bounced back but confidence remains fragile ahead of tonight's news from the Fed and the BoE's pronouncements tomorrow," said Mic Mills, senior trader at ETX Capital.

A rebound by mining stocks added the most weight to the blue chip rally, reflecting a rise in metal prices on the back of a weaker dollar ahead of the Federal Reserve's statement on interest rates and the economy, due at 7:15 p.m..

Fresnillo (FRES.L), Kazakhmys (KAZ.L), Antofagasta (ANTO.L), Xstrata (XTA.L), BHP Billiton (BLT.L) and Vedanta Resources (VED.L) were up 3.3 to 9.2 percent.

Banks recovered from Tuesday's sharp falls as investors re-evaluated the outlook for the sector following the 31 billion pounds in funding from the government agreed for Lloyds Banking Group (LLOY.L) and Royal Bank of Scotland (RBS.L)

RBS added 1.5 percent, while Barclays (BARC.L), HSBC (HSBA.L) and Standard Chartered (STAN.L) gained 1.4 to 4.2 percent. But Lloyds shed 1.2 percent as its record 13.5 billion pounds rights issue weighed on it.

Wall Street posted strong gains in early trade on Tuesday, with U.S. blue chips <.DJI> up 1.2 percent by London's close awaiting the Fed statement, and after the U.S. Institute of Supply Management said activity in the service sector grew for a second consecutive month.

The Fed is seen affirming its stance that policies to support the economy will stay in place for some time while keeping interest rates near zero.

On Thursday, the BoE is forecast to raise its quantitative easing policy and keep interest rates unchanged.

The British services sector showed its strongest activity since the start of the credit crunch in October 2008, the CIPS/Markit services PMI data showed.

British consumer morale hit its highest levels in the last two months since April 2008, according to the Nationwide Consumer Confidence Index.

HIGH STREET HAPPY

Next (NXT.L) was a top blue chip gainer, adding 5.6 percent after the high street retailer reported better-than-expected third-quarter sales and upgraded its sales and profit guidance for the balance of the year.

Retail rival Marks & Spencer (MKS.L) put on 6 percent, as it posted flat first-half profits, near the top end of forecasts as tight management of costs and stocks offset weak sales.

Among other blue chip gainers, Aviva led life insurers higher, adding 5.5 percent, with the firm shrugging aside results that were slightly below forecasts as investors reacted positively to its solvency position.

Travel firm Thomas Cook (TCG.L) jumped 7.4 percent, lifted by an upgrade from Collins Stewart to "buy," with peer TUI Travel gaining 5.5 percent.

British Airways (BAY.L) took on 6.6 percent as UBS upped its rating to "buy" from "neutral" ahead of the airline's second-quarter results, due on Friday.

Among the blue chip fallers, Cadbury shed 1.4 percent after third-quarter results from predator Kraft disappointed, trimming ideas of what the U.S. firm may be prepared to pay for the British confectioner.

Drinks firm Diageo (DGE.L) fell 0.7 percent as Barclays Capital started coverage on the stock with an "underweight" rating and a "negative" view on the sector.

Ex-dividend factors knocked 9.40 points off the index, with GlaxoSmithKline (GSK.L), Intertek Group (ITRK.L) and Royal Dutch Shell all losing their payout attractions.

(Editing by Jon Loades-Carter)