BRITAIN’S main equity index rose yesterday to recover from stinging losses in the previous session, as robust Chinese economic data lifted major mining stocks to allay worries about tighter US monetary policy.
The blue-chip FTSE 100 index closed up by 0.9 per cent, or 56.03 points, at 6,446.87 points, marking its biggest one-day rise in more than two weeks.
The FTSE recovered from a one per cent fall the previous day as the upbeat manufacturing data from China, the world’s biggest metals consumer, boosted mining stocks, with the FTSE 350 Mining Index rising by 2.1 per cent.
The HSBC Flash China manufacturing purchasing managers’ index rose in August to 50.1, its highest in four months, as new orders rebounded.
The data countered lingering negative sentiment surrounding expectations that the US Federal Reserve may start next month to tighten monetary policy measures that have driven much of this year’s global equity rally.
“The Chinese data came in better than expected, and that's pushed us back up,” said Darren Easton, director of trading at Logic Investments.
However, Easton was still erring on the side of caution, due to uncertainty over how financial markets may react next month.
The US Federal Reserve meets from September 17-18, and expectations that this meeting will see the Fed start to tighten its monetary policy has pushed up bond yields over the last month and in turn hit global equity markets.
Easton sold out of the FTSE last week for a profit at 6,600 points having bought in at 6,575 points, but had not bought any fresh positions since.
APS Alpha technical strategist Adrian Slack expected the FTSE to drift lower next month in the build-up to the Fed’s meeting in September, but felt the market would then rally again towards the end of 2013, with many investors encouraged by signs of an improvement in the global economy.
The FTSE has fallen back from a 13-year high of 6,875.62 points reached in late May, but remains up by nearly 10 per cent since the start of 2013.
“I see further weakness coming into September, but I can't see why we shouldn't be able to test the year highs again by the end of the year,” said Slack.
Meanwhile across Europe, the Stoxx 600 rose one per cent, to 303.55, after data showed business activity across the Eurozone picked up more quickly than expected in August.
The FTSEurofirst 300, however, remains three per cent off a five-year high hit in May.