Mining stocks lead weaker banking and power firms

Britain&rsquo;s leading share index ended 0.3 per cent higher yesterday as mining firms gained on the back of higher commodity prices, outpacing some weakness in banks and energy stocks.<br /><br />The FTSE 100 closed 15.22 points higher at 5,327.39, adding to Tuesday&rsquo;s strength when the index recorded its biggest one-day gain in more than four months as worries over Dubai&rsquo;s debt problems receded.<br /><br />Mining stocks extended gains from the previous session, underpinned by firmer metals prices as gold hit a new record high at $1,216.17 an ounce and copper touched a 14-month high earlier in the session. Positive broker comments also helped support stocks in the sector.<br /><br />Platinum miner Lonmin added 3.2 per cent as Investec raised its rating to &ldquo;buy&rdquo; from &ldquo;hold&rdquo;, while <strong>Vedanta Resources</strong> rose 2.5 per cent as Goldman Sachs upped its rating to &ldquo;buy&rdquo; from &ldquo;neutral&rdquo; in a review of the European metals and mining.<br /><br /><strong>Eurasian Natural Resources, Xstrata, Rio Tinto, Anglo American</strong> and <strong>Kazakhmys</strong> put on 0.3 to 2.5 per cent.<br /><br />&ldquo;Buoyant mining stocks, boosted by the weak dollar and rising commodity prices, are proving themselves tempting to bullish investors,&rdquo; said David Jones, strategist at IG Index.<br /><br />Drugmakers were also in demand, with <strong>AstraZeneca</strong> and <strong>GlaxoSmithKline</strong> up 0.4 and 0.2 per cent respectively.<br /><br />Among other individual stocks, accountancy software firm <strong>Sage Group</strong> gained 3 per cent after reporting in-line results, with Deutsche Bank repeating its &ldquo;buy&rdquo; recommendation on the stock.<br /><br /><strong>Vodafone</strong> added 2.2 per cent as Credit Suisse hiked its target price to 160p from 150p based on the broker&rsquo;s view of a recovery in Europe.<br /><br />Oil services firm <strong>Amec</strong> rose 2.2 per cent as Evolution Securities upped its rating to &ldquo;buy&rdquo; from &ldquo;add&rdquo;.<br /><br />Banks retreated from a rally in the previous session, with <strong>Royal Bank of Scotland, HSBC, Lloyds,</strong> and <strong>Standard Chartered </strong>off 0.5 to 2.1 per cent.<br /><br />Britain&rsquo;s Treasury looked set to clash with institutional investors in <strong>Royal Bank of Scotland</strong> after it took control of the bank&rsquo;s bonus pool, the Times reported. A cautious note from <strong>Credit Suisse</strong> on the UK banks also weighed on the sector.<br /><br />Energy stocks tracked lower crude prices, which fell below $77 a barrel. <strong>BG Group, BP </strong>and <strong>Royal Dutch Shell</strong> shed 0.2 to 0.8 per cent. <strong>Cairn Energy</strong> fell 2.6 per cent as Citigroup cut its target price to 2,735p from 3,745p.<br /><br />Among individual fallers, <strong>Severn</strong> <strong>Trent</strong> fell 1.8 per cent, as the stock traded ex-dividend yesterday.<br /><br />Overall, ex-dividend factors took 2.39 points off the index, with<strong> AB Foods, Johnson Matthey, London Stock Exchange, National Grid</strong> and SABMiller all losing their payout attractions. In a brighter outlook for stocks, brokers UBS and ING were optimistic for the prospects for European equities in 2010, citing an upturn in the economic cycle, but both said defensive sectors would outshine cyclical sectors like financials.