FTSE rises on stimulus expectation

BRITAIN’S top share index closed higher, at a fresh five month peak yesterday led by miners and energy issues as commodities rose on optimism governments will act to stimulate economies around the world.

At the close, the FTSE 100 was up 45.63 points, or 0.8 per cent at 5,681.39, its highest close since 26 April.

Miners gave the biggest boost to the index as gold hit a record high and copper rose to its highest since July 2008 on a strong demand outlook and expectations that governments will do more to stimulate the global economy.

Anglo American, Lonmin, Kazakhmys, and Xstrata added between 3.8 and 4.2 per cent, helped by a Morgan Stanley note increasing price targets across the sector.

Oil majors gained as crude hit its highest level in five months, with Royal Dutch Shell up 1.7 per cent.

US blue chips were up 0.2 per cent by London’s close, although an unexpectedly poor reading on private sector hiring provided some caution ahead of September’s jobs report.

Private employers cut 39,000 jobs in September, according to the ADP Employer Services report, the largest monthly loss since January and a disappointment to analysts who had forecast 24,000 private payroll additions.

Meanwhile, on the domestic macro front, a survey by the British Retail Consortium showed that a jump in the cost of agricultural commodities drove British shop price inflation to a five-month high in September.

British Airways was a big blue chip riser, up 4.5 per cent, adding to sharp gains in the previous session when it reported strong September passenger numbers, helped by a Barclays Capital target price hike.

Mid-cap peer EasyJet was the top FTSE 250 gainer, jumping 12 per cent after the budget airline said it expected to beat its profit expectations for the year following a strong performance over the summer.

Autonomy was the top blue chip faller, shedding 16 per cent after the software firm said in a trading update it would cut its full-year revenue guidance by about three per cent after weaker than expected demand.

In reaction, Goldman Sachs removed Autonomy from its “Conviction Buy” list, and Panmure Gordon downgraded its rating to “hold” as estimates and targets were chopped.

Other technology issues suffered in sympathy, with Sage Group down 1.3 per cent.

Food retailer Sainsbury was also a blue chip faller, down 0.6 per cent, as an above-forecast second-quarter trading update prompted some profit taking. Charles Stanley cut the rating on the supermarket for Sainsbury to “neutral” on valuation grounds. And fellow retailer Marks & Spencer shed 0.4 per cent ahead of a trading update due today.