FTSE rebounds after Xstrata board gives thumbs up to Glencore bid

BRITAIN’S FTSE 100 share index rebounded from three-week lows yesterday, bolstered by strong US manufacturing data and prospects of more takeover activity after Xstrata’s board gave long-awaited backing to a bid from Glencore.

Adding to the relatively upbeat investor mood on the first day of the new quarter, Spanish bank stress tests late on Friday revealed no fresh signs of trouble.

That was enough to lure investors back into the FTSE 100, which had fallen 3.2 per cent in the previous two weeks. Gains accelerated in afternoon trade after data from the US Institute for Supply Management (ISM) showed the US manufacturing sector expanded in September for the first time four months.

The FTSE 100 closed up 78.38 points or 1.4 per cent to 5,820.45, recovering from a three-week low of 5,738.59 points and breaking through a string of mild technical resistance levels at the 60, 50,40, 30, 20 and 10-day moving averages.

Yesterday’s recovery followed a wave of profit-taking on Friday, the final day of the third quarter. The FTSE 100 had gained 3.1 per cent in the quarter thanks to expectations for more stimulus, which were met in September by the US Federal Reserve, the European Central Bank and the Bank of Japan.

The strong US data gave a fresh lift to the mining sector, which was already rebounding after Xstrata’s board gave its blessing to leading commodities trader Glencore’s bid following weeks of uncertainty.

Xstrata shares closed up 2.2 per cent, while the mining sector gained 2.4 per cent, adding around 14 points to the FTSE.