London Report: Mid-cap index in historic jump beyond 15,000

BRITAIN’S equity markets rose yesterday, led by financials and mining stocks, with the mid-cap FTSE 250 index closing above the psychologically key 15,000 points mark for the first time in its two-decade history.

Financials, the biggest sector among Britain’s mid and large-caps, rallied thanks to forecast-beating results at the UK’s largest retail bank Lloyds, up eight per cent, and fund manager Jupiter, up 11 per cent.

Miners, meanwhile, benefited after official manufacturing activity data out of top metals consumer China came in better than expected.

The broad equities-friendly backdrop was reinforced by the European Central Bank reiterating plans to keep rates low for an “extended period”.

Comments from the US Federal Reserve overnight had already dampened expectations of its stimulus being scaled back as soon as September, boosting stocks.

“The economic data has been good, the comments from the Fed meetings were OK, even the PMI from China was positive, so there is very little resistance (for equities),” said Zeg Choudhry, head of equities trading at Northland Capital Partners.

A rally on Wall Street, where the S&P 500 topped the 1,700 level for the first time, further boosted sentiment.

That helped the blue-chip FTSE 100 recover from some disappointment at the lack of action or comments by the Bank of England, to finish up 60.92 points or 0.9 per cent at 6,681.98.

The FTSE 250 rose 1.3 per cent to a record closing high of 15,061.21 and continuing its year-to-date outperformance over its bigger peer.

Mid-cap companies generate around half of their sales in Britain, compared to less than a quarter for the blue-chips, putting them in a better position to benefit from the improving domestic economy.

In fresh proof of that recovery, Britain’s manufacturing sector grew at its fastest rate in well over two years in June, according to yesterday’s purchasing managers’ index (PMI) release.

Its strong gains have pushed the FTSE 250 into increasingly expensive territory when compared with 12-month earnings expectations, with the index trading 14 per cent above its 10-year average on that ratio, according to Datastream.

The FTSE 100, in contrast, is still slightly below its historical valuations.

“The price/earnings ratios are getting quite extended in certain well-regarded (mid-cap) companies so there is always scope for disappointment,”

said Paul Kavanagh, chairman of Killik Capital.

“There is greater individual stock risk but at the moment there is still money looking for growth and looking for secure growth so I expect the market will continue to trend higher.”

Across the Channel, the CAC 40 ended 1.25 per cent up at 4,042.73.