Commodities spur FTSE 100 gains as banks bounce bank

COMMODITY stocks led the FTSE 100 top share index higher yesterday, after Alcoa kicked off the US earnings season with an upbeat outlook and data from China lifted sentiment, while retailers rallied after some encouraging updates.

London’s blue chip index rose 84.44 points, or 1.5 per cent to 5,696.70, making up for the 1.5 pe cent decline since last Wednesday, as the FTSE 100 just failed to close above 5,700, a resistance level at which it has fallen away from sharply twice before, in early November and January.

Trade again was thin, just 95 per cent of its already light average 90-day volume. UK gains were supported as Wall Street responded favourably to Alcoa’s forecast of seven per cent growth in global aluminium demand this year and a global supply deficit, despite the company missing earnings expectations.

The announcement helped lift UK miners, while integrated oils rallied too as both sectors gained in tandem with underlying commodity prices after data in China showed commodities imports remained robust in December despite ebbing demand.

“These announcements have reminded traders that with expectations so low for this year there is room for positive surprises,” Colin Cieszynski, Market Analyst at CMC Markets, said.

Kazakhmys was up 5.9 per cent, but highlighting the continuing worries over the outlook for the global economy gold miner Fresnillo rose 5.7 per cent. Energy firm BG Group added 1.5 per cent as three sources with direct knowledge of the matter said it had received six to seven bids for acquiring its 65 per cent stake in India’s Gujarat Gas, in a deal valued at about $900m (£581m).

Banks, knocked by Europe debt concerns on Monday, bounced back as Fitch backed away from threats to cut France’s triple-A credit rating this year. Barclays and Royal Bank of Scotland gained 5.7 and 5.2 per cent respectively.

Sales at Marks & Spencer, Debenhams and Majestic Wine lifted spirits in the sector following disappointing updates from the likes of HMV, Game Group and Morrison's in recent days.

M&S climbed three per cent, erasing the previous sessions losses, as sales in the 13 weeks to 31 December rebounded from falls in the second-quarter. Mid cap Debenhams was up nine per cent after posting a slightly better than expected performance in underlying sales in the last 18 weeks as deep discounts lured customers in the run up to Christmas.

“Commentators and analysts were in the main deeply pessimistic ahead of today’s results. Yet in both cases results have exceeded expectations, and we are seeing relief rallies as a result,” Paul Mumford, senior fund manager at Cavendish Asset Management, said in a note.

Small cap Majestic Wine added 15 per cent after the British wine retailer reported a four per cent rise in underlying Christmas sales.

There were only a handful of blue chip fallers, with drugmaker GlaxoSmithKline down 1.1 per cent, extending Monday’s falls which followed slightly downbeat drug filing news.

Aggreko fell 0.4 per cent, surrendering some of the previous session’s gains as RBC Capital Markets downgraded its rating for the temporary power provider to “sector perform” from “outperform” on valuation grounds.