London Report: FTSE spurred to three week high by US outlook

THE UK’S top share index touched a three-week high yesterday, with cyclical stocks rallying on the back of an improving US economic outlook and expectations of more stimulus from China.

The blue-chip FTSE 100 index extended earlier gains to set its highest level since 12 March after data showed US factory activity accelerated for a second straight month.

The index closed up 0.8 per cent at 6,652.61 points.

The UK banking index rose 1.2 per cent, the top sectoral gainer, while miners advanced one per cent on expectations that China, the world’s biggest metals consumer, will announce more measures to prop up its economy.

Global diversified miner Rio Tinto rose 1.1 per cent and Vedanta Resources advanced 0.9 per cent.

“Mining is a very healthy area of the market. Anything that takes away some tail risk on the Chinese activity side and provokes a new stimulus package will certainly help to reassure the market,” said Ian Richards from Exane BNP Paribas.

A string of weak economic data from has lent support to a view the Chinese government will try to boost demand, and premier Li Keqiang said last week Beijing could act to support infrastructure investment.

BHP Billiton, up 2.1 per cent, led the mining sector higher on news that it was considering options to simplify its portfolio of assets, including a possible spin-off of unwanted operations like aluminium and nickel into a separate company.

“For those investors looking to increase their exposure to more cyclical parts of the market, we believe the mining sector offers a number of attractive stocks,” said Paul Kavanagh, director of market research at Killik.

Among other sharp movers, Aberdeen Asset Management rose 6.7 per cent to be the top percentage gainer on the FTSE 100. Investors welcomed cost cuts at the asset manager and a slowdown in the pace of outflows, confounding hefty bearish bets on the stock.

Markit data showed the stock was heavily “shorted” by speculative investors in recent months in anticipation of poor results.

Charts signalled more gains, with analysts saying the FTSE 100 could move up towards the top end of a range, between 6,400 to 6,800 points, it has been trapped in since late October.