Miners, banks lead broad-based FTSE rally

City A.M. Reporter
Miners and banks have led a broad-based FTSE rally into the long holiday weekend.

Leading the charge higher were heavyweight diversified miners, contributing 16 points to a one per cent higher FTSE 100 close, buoyed by rising commodity prices.

The FTSE 350 Mining index ended up two per cent, boosted by gains in metals including copper and led by a 2.9 per cent rise for Rio Tinto that added 6.6 points to the main board.

"The positive reaction of the miners and oils to longer term uptrends suggests the market is broadening out again and we're not going to see a wholesale sell-off in cyclicals just yet," said Arbuthnot technical analyst Dominic Hawker.

While sector rotation into defensives had increased in recent weeks, long-only funds were still buying into a a positive mining sector outlook, Peter Sullivan, HSBC's European head of equity strategy, said.

"There might be a problem in the short term - there's debate about how tight monetary policy is and whether growth slips back again - but they're toughing it out and looking at the longer-term story; they're suprisingly pro-cyclical."

Chartist sentiment seemed to be less bullish on the broader index.

RBS analyst Dmytro Bondar said the FTSE 100 was posting "lower highs and lower lows, indicating a downtrend. The bias remains for this theme to persist till the middle of June" while Nicolas Suiffet at Trading Central cited short-term resistance at 5,970 points on the intraday chart.

Main resistance, Arbuthnot's Hawker said, would be at around 6,100, the 2011 high.

After recovering from the March sell-off to form a reversal base at 5,825, the index looked set to fluctuate in "fairly trendless" fashion between that and the year high.

Sharing the limelight with miners were the leading banking shares, sold off since the turn of the year but boosted by broker comment and hopes European officials would adopt a lighter touch on capital rules.

A Citi upgrade on the UK banking sector to "overweight" combined with an initiation by French peer Societe Generale on banks including Lloyds Banking Group and Royal Bank of Scotland with "buy" ratings buoyed sector sentiment.

The FTSE 350 Banks index ended up 1.4 per cent, more than reversing the previous session's decline.