FTSE rallys on commodities but Eurozone doubts linger

BRITAIN’S top shares rose yesterday as rallying commodity stocks helped the index recover some of its poise, but the advance may be short-lived as investors find themselves hemmed in by Eurozone debt concerns.

The FTSE 100 closed up 22.52 points or 0.4 per cent at 5,858.41, having hit a two-month closing low on Monday after a downgrade of Greek debt, a ratings outlook warning on Italy and doubts about austerity measures in Spain.

“We’ve got quite a lot of negative sentiment out there ... if traders are going to take on a bit of risk, it’s mainly with a view to just a very short-term bounce and nothing more long-term than that,” Joshua Raymond, market strategist at City Index, said.

Bargain hunters moved in on miners, which recovered along with metals prices after Monday’s falls, with Antofagasta among the best off, up 3.1 per cent.

Glencore added 2.1 per cent but remained below its issue price as unconditional trading began in the commodity trader’s stock.

Integrated oil stocks found favour as crude rose after Goldman Sachs hiked its oil price forecasts, led by a 2.5 per cent advance in BG Group as the same broker hiked its target price for the company.

Cairn Energy added 4 per cent in heavy trading as the oil explorer announced a drilling campaign offshore Greenland.

Marks & Spencer was the biggest blue-chip faller, off 2.9 per cent after the food and clothing retailer said it had made a good start to the new financial year but expected trading conditions in the year ahead to be challenging.

Primark owner Associated British Foods slipped 1 per cent and supermarket chain Tesco drifted 0.4 percent lower.

“We remain very wary of direct exposure to the UK consumer, in particular the retail sector,” said Jamie Seaton, manager of the £64.6m SVG UK Focus Fund, run by SVG Investment Managers.

“With upward pressure on consumers’ non-discretionary spend, borrowing costs, energy bills, petrol etc, this is putting a significant squeeze on disposable income.”

Banks were out of favour after credit rating agency Moody’s said it might cut its rating on 14 British financial groups, including Lloyds and Royal Bank of Scotland, off 2.2 per cent and 1.1 per cent respectively.

“While there is certainly a fair amount of credibility to Moody’s actions, we also note the capital position of the UK banks is among the best in Europe,” Espirito Santo Investment Bank said in a note.

British Airways owner International Airlines Group fell 1.8 per cent as flights in northern Britain and elsewhere in north Europe were cancelled over worries about a volcanic ash cloud from Iceland, though officials reckoned the disruption would not be as bad as last year.

In Europe, shares edged up yesterday, with miners among those recovering some ground lost in a sharp sell-off in the previous session, though analysts said markets might struggle to make much progress in the short term.

The pan-European FTSEurofirst 300 index of top shares rose 0.2 per cent to close at 1,118.76 points, having fallen 1.7 per cent on Monday. The index remained below its 50-day moving average, a bearish signal.

It is just below the middle of a range defined by the 2011 high of 1,190.51, hit in mid-February, and a low of 1,066.62, hit in mid-March.