MAJOR mining stocks experienced a sharp reversal yesterday, turning higher on hopes of stimulus after weak data in China, which led the UK’s top share index to recoup early losses.
The blue-chip FTSE 100 index was up 17.73 points, or 0.3 per cent, at 6,736.22 points by the close, turning higher after gains in early trade on Wall Street.
The index is up 2.6 per cent since the start of 2015 but is over five per cent below an April record high of 7,122.74 points.
Miners, which account for around a tenth of the FTSE 100 in terms of market capitalisation, recouped early losses to finish among top gainers.
While weak China data had hit copper, mired at a six-year low, it rallied on hopes that it may prompt further stimulus from Chinese authorities.
Jeremy Batstone-Carr, market analyst at Charles Stanley, remained cautious on the mining sector, and said that weak data may result in China devaluing its currency.
“The pressure is rising on China to devalue... which would support China’s equity but not help metal prices or UK-listed miners,” he said.
Oil stocks were some of the most heavyweight fallers, trimming five points off the index as the poor China data also sent the price of brent crude oil to a six month low, before rebounding slightly.
Analysts also pointed out that the FTSE is more heavily exposed to commodity stocks than many of its other European counterparts.
“The continental European markets look a lot better than the UK at the moment,” said Andreas Clenow, hedge fund manager and principal at ACIES Asset Management.
“I would favour the Euro STOXX over the FTSE,” he added.
Among mid caps, insurance company Esure dropped 9.6 per cent after its interim results marginally missed analysts’ consensus forecast, hit by weakness in its motor insurance business.
“The company posted a massive 81 per cent drop in trading profit from its motor insurance arm, decidedly offsetting a rise in premiums in other areas of the business,” Augustin Eden, analyst at Accendo Markets, said in a note.