FTSE begins the quarter strongly on healthy data

BRITAIN’S top share index rose yesterday, with strong domestic and global data encouraging fresh bets on industrial and construction stocks on the first day of the new quarter.

Building materials supplier Travis Perkins – promoted to the FTSE 100 last month – and DIY retailer Kingfisher benefited from signs of a pick-up in the housing market, with mortgage approvals at a 3 1/2-year high in May and house prices rising.

Meanwhile, news that Britain’s manufacturing sector grew at its fastest pace in two years last month, helped boost companies such as Melrose, which added 4.5 per cent, and BAE Systems, which rose 3.8 per cent.

Solid US manufacturing data from the Institute for Supply Management also offered some reassurance about the health of the world’s biggest economy, while a weak employment index signalled that the Federal Reserve may yet keep its stimulus programme in place for some time to come.

The strong data helped support energy and metal prices, boosting the FTSE’s first and third biggest sectors.

“Some people would put it down to the first trading day of the month, but I think there is probably a bit more to it,” said Zeg Choudhry, head of equities trading at Northland Capital Partners. “We had some decent data, gold bouncing off its low and ... the miners have done quite well today which should give investors a bit more confidence to come back.”

The FTSE 100 gained 92.31 points, or 1.5 per cent, to 6,307.78 points, recovering after a 5.6 per cent drop in June, its first monthly fall in over a year.

The British benchmark has posted gains on the first day of 16 out of the last 18 months, according to research from BTIG.

Analysts at Coutts said signs of improvement in the British economy, coupled with a bottoming out in top trading partner Eurozone, boded well for the FTSE 100.

“We estimate the fair value of the FTSE 100 to be 6,550 – suggesting there is plenty of room to grow from current levels.”

Technical charts also suggested some scope for optimism on the British stock market, with the 200-day moving average providing strong support, and analysts saying the market should have a fairly smooth ride up until resistance around 6,400.

Volumes were light – at around 84 per cent of the 90-day daily average – highlighting concerns about the length of the rebound over summer.