London Report: FTSE spurred to three-week high by Chinese data
THE UK’S top share index reached a three-week closing high yesterday, buoyed by miners, after top metals consumer China reported robust trade data.
Mining companies are recovering from a sharp decline in 2013, after a sector-wide drive to offset falling metals demand with cuts in spending.
They got a boost yesterday from the fresh evidence that the Chinese economy is stabilising.
The UK mining index, up 1.1 per cent, hit a three-month high yesterday after Chinese exports and imports beat expectations in January.
“Economic data from China is providing a lift to the mining sector, easing fears with regards to a potential slowdown in commodity demand,” Keith Bowman, equity analyst at Hargreaves Lansdown, said yesterday.
The health of the Chinese economy is a key factor for the FTSE 100, given the mining sector’s heavy weighting. It is the fifth biggest sector on the UK benchmark, accounting for around eight per cent of the index, data shows.
The sector has got off to a solid start this year, up nearly six per cent, against a 1.1 per cent drop on the FTSE 100.
“We expect the miners to continue to perform well in the immediate short term, as the market focuses on better cashflow from volume growth, weaker FX, cost reductions and capex cuts,” Goldman Sachs said in a note.
The blue-chip FTSE 100 index ended up 2.37 points – flat in percentage terms – at 6,675.03 points, marking its sixth straight day of gains.
The market showed little reaction to comments from Bank of England Governor Mark Carney and other British monetary policymakers at a news conference after the Bank published its quarterly Inflation Report.
“It’s pretty much steady as she goes,” CMC Markets senior market analyst Michael Hewson said.
“He’s reiterated the low interest guidance, and as such I think markets have acted fairly benignly towards that.”
The FTSE 100 index has rebounded from its December lows, which have acted as the springboard for a decent bounce, lifting the index above its 50-day moving average.
Bill McNamara, a technical analyst at Charles Stanley, said the short-term outlook remains encouraging, with most indicators pointing towards further gains.
His next upside target for the index is at 6,750 points.