COMMODITY stocks helped power the FTSE 100 index sharply higher yesterday, while earnings from Reckitt Benckiser and Home Retail, following US tech bellwether Intel, boosted risk appetite.
The FTSE 100 closed up 125.39 points, or 2.1 per cent, at 6,022.26 following a 0.5 per cent gain on Tuesday. This wiped out Monday’s 2.1 per cent drop, driven by the S&P ratings agency cutting its US credit outlook to negative.
“Recent volatility has created a perfect scenario for investors and fund managers to top up holdings at beaten down prices,” said Jimmy Yates, head of equities at CMC Markets.
Sovereign debt worries and global political unrest has seen investors pour funds into commodities. Gold hit $1,500 an ounce for the first time in its history and oil held near multi-year highs around $122 a barrel.
Data overnight in China helped sentiment. Shore Capital analysts said the Conference Board leading index showed signs that the pace of slowdown in the Chinese economy is moderating, which should help miners start to pick up market leadership.
Miners were strong performers. Xstrata added 4.9 per cent as JP Morgan upgraded its rating on the firm to “overweight” from “neutral”, citing its outlook and potential benefits from part-owner Glencore’s listing on the FTSE.
BHP Billiton climbed 2.6 per cent after it boosted its quarterly production of iron ore.
Integrated oils also rose. BP added three per cent as Russian prime minister Vladimir Putin tried to soothe BP’s worries about its future in the country, after the British firm’s Arctic exploration and share swap deal with Rosneft deadlocked.
Earnings optimism helped lift London’s blue chips, with ARM Holdings up 5.7 per cent after strong results from US tech firm Intel.
Reckitt Benckiser rose 3.9 per cent after the British consumer goods group beat first-quarter earnings forecasts just days after the shock retirement of its chief executive Bart Becht sent the shares tumbling.
FTSE 250 firm Home Retail Group gained 5.5 per cent after assuaging investors’ fears with in-line results, which helped propel peer Kingfisher up 3.8 per cent.
A ratings upgrade to “outperform” from “sector perform” by RBC Capital Markets helped lift aerospace parts manufacturer GKN 5.6 per cent.
HSBC raised earnings estimates, ratings and target prices for some UK housebuilders, which the broker said should benefit from new-build price resilience and government intervention.
Among the firms HSBC upgraded were FTSE 250 firms Persimmon and Bovis Homes, up 1.6 and 1.7 per cent respectively, which helped boost appetite for FTSE 100 peer Wolseley, up 3.8 per cent.
Technical analysts warned that recent volatility is likely to continue.
“[Has] the leading index already put in a short-term bottom? It really is too soon to tell. Technical evidence pointed towards more volatile, choppy trading for the FTSE and that is still very much the case,” a technical analyst said.
BAE Systems, Legal & General, Reed Elsevier and Resolution all traded ex-dividend.
Wall Street was up strongly as the UK market closed with signs that confidence in the recovery of the world's biggest economy was growing.
Sales of previously owned US homes rose more than expected in March.