Mining strength offsets worries over Greek deal - London Report

BRITAIN’S top share index turned lower after touching a three-week high yesterday although it still outperformed Eurozone shares with strength in the mining sector insulating the index from the Greek debt standoff.

The blue-chip FTSE 100 index hit 6,873.43 in morning trade, its highest level since June 4.

It turned lower to trade up just 9.93 points, or 0.2 per cent, at 6,844.80 points by the close, after Greece said that international lenders had rejected its latest proposals to avert default.

With firmer commodity prices supporting mining and energy stocks and a rally in retailers, the index outperformed euro zone indexes, which traded lower.

Miners were in demand, with the UK sector index rising 1 per cent, tracking rises in major industrial metals such as copper and aluminium.

“A rise in metals prices and recent data showing an improvement in Chinese manufacturing are providing a tailwind to the market, but investors will continue to be cautious as we haven’t yet seen a firm direction for commodity prices,” said Keith Bowman, equity analyst at Hargreaves Lansdown.

The UK oil and gas index gained 1.5 per cent, the top sectoral gainer, after oil prices rose on hopes for stronger-than-expected US crude demand, while doubts over the prospect of reaching an agreement on Iran’s nuclear programme by a 30 June deadline eased oversupply concerns.

Royal Dutch Shell rose 2.3 per cent, also benefiting from a target price upgrade from Deutsche Bank, who said that its dividend was sustainable and that they expected a deal to buy BG to be completed.

Investors also showed interest in retailers after a positive sector note from Societe Generale. J. Sainsbury rose 2.3 per cent to 276p, the top gainer in the FTSE 100 index, after the bank raised its stance on the stock to “buy” from “hold” and lifted its target price to 315p from 260p.

“We think that the group’s profile is more resilient than many fear, thanks to its strong differentiation (clear focus on quality and in-store services) and efficient marketing policy,” Societe Generale analysts said in the note. Shares in fellow grocer Morrisons rose 2.6 per cent.

Sage Group was the biggest faller, down 6 per cent, after it said it would cut its general and administrative costs to reallocate funds to investment plans.