Commodities lift FTSE and offset weak banks and travel
STRENGTH in commodity stocks helped Britain’s leading share index edge higher yesterday, offsetting weakness in banks and travel stocks, as some of the recent gloom lifted in the absence of further glum data.
The FTSE 100 closed up 8.15 points, or 0.1 per cent, at 5,863.16 points, adding to Friday’s 0.1 per cent gain after a poor US jobs report was seen as priced-in.
“There’s been no new depressants, so oversold commodity have come up for air and given the market a lift,” said Mic Mills, head of electronic trading at ETX Capital.
“But how long this respite will last is the real question, with nothing seen to change the overall cautious picture for the global economy at present,” Mills added.
Strength in miners was the main prop for blue chip gains as the price of copper and other metals rose, supported by a weak dollar on expectations the Federal Reserve will continue to supply liquidity to the market.
Recently-listed commodities trader Glencore was the top blue chip gainer, up 2.0 per cent, as Deutsche Bank started coverage with a “buy” rating and a 650 pence price target.
The broker said the company’s growing producing base and successful trading business made Glencore different to the diversified miners with which it is often compared.
Integrated oils also lent strength, led by BG Group ahead 0.7 per cent.
Banks, however, stayed gloomy. Part-nationalised Lloyds Banking Group the biggest blue chip faller, was down 3.8 per cent to its lowest in more than a year.
Investment banks are finalising sale documents that will start the bidding process for the sale of £4.4bn worth of assets by Lloyds and fully-nationalised peer Northern Rock, according to reports.
Travel stocks lost out as Goldman Sachs cut its rating for the UK sector to “underweight” from “overweight”, part of a number of changes in a European strategy review.
“Reflecting downgrades in our global growth expectations we are becoming more selective on our cyclical exposure,” Goldman said.
Cruises firm Carnival shed 0.8 per cent, while tour operator TUI Travel lost 1.1 per cent, adding to the possibility that it could be demoted from the FTSE 100 index when the quarterly reshuffle is announced tomorrow.
And IAG dropped 3.0 per cent as industry body IATA, whose airlines claim to carry 93 per cent of global passenger traffic, said it expects industry profits of $4bn (£2.4bn) in 2011, down from a previous $8.6bn estimate.
US blue chips were down 0.1 per cent by London’s close, with the broader S&P 500 index losing 0.3 per cent and heading into a technical danger zone, commentators said.
Technical analysis of the FTSE 100 index was cautious.
“Overall bias remains skewed to the downside, although this week there can be some rebound as the index is testing an important support level at 5,804, being the 50 per cent retracement from the 10 December -11 January impulse wave and also the level of the 200-day moving average,” RBS said in a note.
Meanwhile European shares on concerns the pace of growth in the global economy could be slowing and with traders cautious on expectations the ECB may signal a July rate rise. The FTSEurofirst 300 fell 0.6 per cent to 1,104.97, an 11-week closing low.