Mining shares rebound and oil stocks rise on supply fears

MINERS rebounded from the previous day’s sharp sell-off to help push Britain’s top share index higher yesterday, while oil stocks tracked crude higher on supply fears.

The FTSE 100 closed up 47.45 points, or 0.8 per cent, at 5,856.34, having bounced well clear of the session low of 5,795.00, although thin volumes exaggerated the index’s move.

Integrated oil stocks added the most points to the blue-chip index as crude rose $1.39 to $102.13, while miners also saw strong gains, led higher by a 2.5-per cent advance from Chilean copper miner Antofagasta, Wednesday’s biggest FTSE 100 casualty.

A surprise narrowing of the US April trade deficit offered investors respite after a run of gloomy economic data, but the prevailing tone was one of caution, with a rise in US weekly jobless claims adding to fears the labour market has stalled.

“Really we’re heading into the summer now, and everything’s a problem for the markets,” David Morrison, market strategist at GFT Global, said.

“We’ve got problems in Europe with the debt crisis, the difficulties Japan’s still facing (post-earthquake), China is doing everything to slow things down and the foot’s coming off the pedal as far as the Fed’s concerned in terms of stimulus.”

US blue chips were up 0.8 per cent by London’s close.

Weakness was seen on Britain’s high street after the UK’s biggest household goods retailer Home Retail reported a slump in first-quarter sales at its Argos chain, sending its shares down almost 14 per cent.

J Sainsbury, scheduled to issue a trading update next week, dropped 1.2 per cent, while Marks & Spencer slipped 0.9 per cent.

Both the Bank of England and the European Central Bank left interest rates on hold yesterday. The BoE’s decision was widely anticipated, but the ECB’s move was less expected.

“There was a lot of talk that the ECB were going to put rates up by a quarter of a per cent... If the Eurozone were to go up a quarter of a per cent, the concern was that the UK would have to follow suit sooner rather than later, and I think that would have worried the market,” Yusuf Heusen, senior sales trader at IG Index, said.

But ECB president Jean-Claude Trichet did signal that rates would rise next month, saying that “strong vigilance” is needed, a phrase often used to signal a hike at the next meeting.

Among individual movers, Weir Group rose 4.8 per cent, topping the FTSE 100 leader board, as RBC Capital Markets became the latest broker to talk up the virtues of the British engineer, lifting its earnings forecasts.

Smiths Group, meanwhile, fell 1.4 per cent as Evolution Securities initiated coverage on the technology firm with a “reduce” rating following Wednesday’s trading update.

Imperial Tobacco also dropped 1.4 per cent, with UBS highlighting that Philip Morris has again cut the prices of its major Spanish cigarette brands, with the broker assessing the financial impact on Imperial should it follow suit.

“Were Imperial to reduce the price of all its brands by €0.10 per 20... then we estimate this would have an annualised impact on net sales of about £65m and impact on EBITDA of £35-40m,” UBS said in a note.