Miners drive the FTSE back from morning losses

BRITISH shares edged higher yesterday, recovering from steep early losses after holding at a key technical level and seeing a recovery in the downtrodden mining sector.

The FTSE 100 closed up 5.18 points, or 0.1 per cent, at 6,304.63, having fallen as low as 6,205.71 after a 6.4 per cent slide on the Japanese Nikkei set a weak tone for the morning session.

“Following the Asian markets, we were always going to open negatively... but we came close to the 200 day moving average (at 6,143.12), and a failure to break that has helped calm the fear factor,” Alastair McCaig, market analyst at IG Index, said.

“A dip even below the 6,200 level would’ve been pessimistic, but the fact that we didn’t do that has seen people entering the market here.”

Miners rose 1.8 per cent, the top sectoral gainers, after bouncing off four year lows.

The sector is down 20.3 per cent on the year but regained some traction as heavily hit emerging market currencies slowly recovered, benefitting from central bank support, such as an unexpected rate rise in Indonesia.

“Some of the emerging market currencies steadied this morning, benefitting from central bank intervention like in Indonesia, and that’s helped the miners, and in turn the market, a bit higher,” Andy Ash, head of sales at Monument Securities, said.

“The FTSE is likely to churn about for now, however, and we may not get a clear direction until the US Federal Reserve meeting next week.”

No changes are expected to the US central bank’s monthly purchases of $85bn in bonds when its policy-setting committee meets 18-19 June, even though fears that the level of buying is to be reduced have hit markets in recent weeks.

The FTSE pared losses after US data showed retail sales and jobless claims showed resilience in the economy, although it is unlikely the Federal Reserve will reduce stimulus soon as manufacturing is struggling.

“The US data was good, and it’s helped drag sentiment higher... we’ve seen enough negativity around quantitative easing anyway for people to take improvement in the economy at face value this time,” McCaig said.

Royal Bank of Scotland was the top faller, down 3.3 per cent after the surprise exit of chief executive Stephen Hester, announced on Wednesday evening. Some investors believe the departure to be a big loss for the majority state-owned bank.