Upbeat engineers and banks drive FTSE 100 to 1.2pc gain

MINERS, banks and engineers drove gains in Britain’s top share index by the close yesterday as hope grew that the nuclear crisis in Japan is easing, while heavyweight Vodafone was boosted by M&A activity.

The FTSE 100 closed up 67.96 points, or 1.2 per cent, at 5,786.09, its third straight session of gains. The index is still down around four per cent in March.

“The action by coalition forces in Libya over the weekend has helped market uncertainty in the short-term but it would be dangerous to assume it will be plain sailing for shares from here,” said David Jones, chief market strategist at IG Index.

Mobile operator Vodafone gained 3.6 per cent after US group AT&T said it was planning to pay $39bn (£23.9m) for Deutsche Telekom’s T-Mobile USA.

Deutsche Bank said the deal was positive for the long-term value of the US market and Vodafone’s 45 per cent stake in Verizon Wireless. BT was up 2.4 per cent.

Engineers, among those hit hardest last week by the flight to safety prompted by a nuclear crisis caused by a massive quake in Japan, were the strongest gainers and were also lifted by positive broker comment.

Enginemaker Rolls Royce rose 3.5 per cent, supported by an upgrade by Evolution Securities to “buy”.

Weir Group, a supplier of industrial pumps and valves, gained 4.5 per cent after Credit Suisse upped its rating to “outperform” on valuation grounds. The positive broker comment lifted sentiment elsewhere in the engineering sector, with Invensys the top FTSE gainer, up 5.1 per cent.

“Investors were waiting for more clarity on the situation in Japan and in Libya over the weekend, and there’s been no more bad news,” said Lothar Mentel, chief investment officer at Octopus Investments, though he said gains were vulnerable.

“It’s not a solid situation and another bad explosion at the Fukushima plant would see another sharp sell-off,” he said, adding that this poses more risk than the situation in Libya.

Banks, which tend to gain strongly when equities are positive, were firmer with Standard Chartered up 1.7 per cent and Barclays adding 2.6 per cent. JP Morgan said the four to six per cent markdown in global equities after the Japanese quake should only be short term “given that loss of activity due to the [Japan] earthquake is likely to be temporary”.

It saw value in the insurance and automotive sectors, and said miners and capital goods firms were good plays on emerging markets outperformance and higher commodity prices.

Oil prices, which rose over one per cent, were also seen as a potential brake on equity strength. Western powers continued air strikes in Libya, threatening Middle East supplies. India-focused refiner and power generator Essar Energy fell 7.3 per cent after saying a number of key power projects would be delayed.