London Report: Bullish stance on China lifts mining stocks

BRITAIN’S top share index edged higher yesterday, with a rise in metals prices on improving seasonal demand from China, the world’s biggest consumer of industrial metals, helping mining stocks.

The UK mining index rose 0.6 per cent, the best sectoral performer, after copper and zinc rose more than one per cent on signs of stronger confidence in the Chinese economy.

The blue-chip FTSE 100 index closed 14.06 points, or 0.1 per cent, higher at 6,565.59 points after falling to a low of 6,535.78 earlier in the session. The index is up more than 11 per cent so far this year.

Analysts said the index had the potential to perform well this year as equities had become attractive compared to other asset classes because of an improvement in the economic outlook.

“We’re seeing flows out of bonds and bank accounts pay negligible interest at best, so where else can the market put money to work other than stocks,” said Mike Jarman, chief market strategist at H2O Markets.

“Equities have good momentum for the year, barring a government shutdown in the US, there’s very little that will cause the market to capitulate so long as macro data doesn’t deteriorate.”

Jarman said he would buy sectors that had underperformed as portfolios would begin to chase returns going into the final quarter of the year. Sectors such as mining had the potential to outperform as China begins to refocus its efforts on making their economy more domestic consumption based.

However, the broader stock market’s gains were capped by a fall in some utility companies, which came under further pressure following a pledge by the country’s main opposition party to freeze energy and gas prices if elected in 2015.

Utilities Centrica and SSE extended their losses after opposition Labour leader Ed Miliband revealed his plan earlier this week to freeze energy prices until 2017 to help consumers hit by rising prices.

Centrica fell 2.3 per cent, the biggest decliner on the FTSE 100 and after dropping 5.3 per cent a day earlier, with JP Morgan cutting its stance on the stock to neutral from overweight. SSE fell 1.9 per cent after slipping 5.8 per cent on Wednesday.

Meanwhile, shares elsewhere in Europe fell, the Dax losing 0.02 per cent and the Cac down 0.2 per cent.