Commodity shares lift FTSE on sunny US and China stats

COMMODITY stocks led the FTSE 100 sharply higher yesterday, as US jobs data boosted confidence that the world’s biggest economy was showing signs of picking up heading into second-half.

Integrated oils rose along with crude oil as reports showed US private employers stepped up hiring in June and the number of Americans filing for jobless benefits fell last week.

Miners, hurt by concerns earlier in the week that China’s steps to cool its overheating economy was stifling growth, rebounded strongly following the US jobs data, and as analysts sounded more upbeat on China.

Michael Wen of China Asset Management, said he was “confident that the fundamentals of the Chinese economy are still in good shape”.

“Once the inflationary pressure eases off, one can expect huge growth potential.”

London’s blue-chip index, which is heavily weighted towards commodity-related stocks, closed up 51.63 points, or 0.9 per cent at 6,054.55, its highest closing level since 5 May.

The index has risen nearly seven per cent since touching three-month lows 11 days ago, driven mainly by hopes that Greece will avoid defaulting on its debts.

Banks, which hit the buffers over the past three sessions on worries Greece’s problems could infect other peripheral Eurozone economies, were given a lift after European Central Bank (ECB) president Jean Claude Trichet said the ECB would suspend its minimum credit rating threshold for Portugal until further notice.

“[The move] frees the hands of the ECB to lend to Portugal more loosely, reaffirming their support to the nation,” said Joshua Raymond, chief market strategist at City Index.

“It could also be a defensive move in anticipation of further action by ratings agencies in the near future to protect the indebted country from an escalation in its existing financing problems.”

Elsewhere, M&A talk swirled around London-listed stocks, with traders citing UK auto and aerospace parts maker GKN, up 3.2 per cent, as a potential 350p per share bid target for Chinese automaker SAIC Motor.

Companies listed on the London stock exchange are viewed as cheap compared to their historical averages, making them ripe takeover targets.

The FTSE 100 currently trades on a forward price-earnings multiple of around 9.4, compared with a 10-year average of 14.1, according to Thomson Reuters data.

Investors toasted the world’s biggest listed hedge fund manager Man Group, up 3.6 per cent, after it reported stronger-than-expected first-quarter inflows.

Helping drive performance in equity markets was the expectation of lower interest rates for longer as the Bank of England decided to hold its key interest rate at a record low of 0.5 per cent.

Money markets are not fully pricing in a UK rate hike until mid-2012, meaning equities offer better yields as an asset class.

On the downside, Anglo-French property investor Hammerson fell 4.8 per cent as Canada’s Cadillac Fairview, Ontario Teachers’ Pension Plan, completed a placing of 85.6m shares at 463p each.

Satellite broadcaster BSkyB slipped 1.8 per cent on concerns News Corp’s buyout deal could be hit by new phone-hacking allegations – though the parent firm’s shares rose later in New York as the markets absorbed the closure of the News of the World.