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London rises as miners and energy companies set pace

LONDON’S top share index rose one per cent yesterday as big gains from miners and energy stocks, boosted by firmer commodity prices, outpaced faltering banks following disappointing results from HSBC.

The FTSE 100 closed 51.42 points higher at 5,405.94 points, having hit a five-week high earlier in the session of 5,420.83. The index has rebounded over 6 per cent since its year low at the start February.

“February was a good month for the index but there still feels like there is a lot of money on the sidelines with investors waiting to get in on the back of a real move,” said Jimmy Yates, head of equities at CMC Markets.

“It would be nice to put the Greece situation to bed but momentum is definitely on the upside.”

Miners were in demand, boosted by higher metal prices as the US dollar strengthened and supply fears remained following the massive earthquake in top copper producer Chile, although there were reports that mines had begun restarting their operations.

Global miner Anglo American gained 2.5 per cent as it said it had restarted operations at four of its copper operations in Chile after the earthquake cut power to deposits which deliver more than half of its mined output.

Other miners were firmer. Rio Tinto, Xstrata, Lonmin, Kazakhmys and BHP Billiton and Eurasian Natural Resources added 1.9-5.2 per cent.

Energy stocks were strong risers with crude holding around $80 per barrel, as disruptions at some Chilean gas terminals continued following the earthquake.

BG Group, BP, Royal Dutch Shell, Tullow Oil and Cairn Energy added 0.7-3.5 per cent.

Among individual gainers, Pearson added 4.8 per cent as the owner of the Financial Times forecast a rise in profit this year, after record investments in its education business helped it take market share and beat forecasts for its 2009 results.

Banks were the biggest drag on the index, after results from HSBC showed loan impairments outside the U.S. were higher.

Shares in HSBC fell 5.2 per cent, while Standard Chartered, Royal Bank of Scotland, Barclays and Lloyds Banking Group fell 0.1-4.3 per cent.

Prudential topped the list of blue-chip fallers, down 12 percent after the insurer said it would buy AIG’s Asian life insurance arm for $35.5bn.

The pound tumbled over two per cent to below $1.48, pressured by the Prudential deal, and also as markets were jittery on uncertainty over the forthcoming election, with polls showing that the ruling Labour party may win another term in power.

Aviva, down 3.9 per cent, was weighed down by the Prudential news, as takeover hopes for the insurer faded on news of joint predator Prudential’s Asia foray, traders said.

Legal & General, also a long-perceived takeover target among the insurers, fell 5.1 per cent.

There was some encouraging data on the economic front both in the UK and the United States suggesting the economic recovery may be gathering pace. Britain’s manufacturing sector expanded faster than expected in February. Consumer and mortgage lending rose faster than expected in January, Bank of England figures showed.

In the US, consumer spending increased slightly faster than expected in January. The US manufacturing sector grew in February, The Institute for Supply Management said.