FTSE recovers on Chinese hopes
Friday, March 21 09:27:08
Britain’s top shares rose today, buoyed by solid gains from mining stocks on optimism that further stimulus measures could be taken by top metals consumer China to prop up its economy.
The FTSE 350 Mining index, down some 10 percent from a late February peak and pegged back by worries over the pace of Chinese growth, led the market higher on Friday with a 1.2 percent advance.
Some investors are starting to take a more bullish view on the sector, since the fears over China’s economic slowdown have fuelled rumours that Beijing may introduce fresh stimulus measures to stabilise growth.
“I think you’ve just got a little bit of chatter that maybe the government should roll out measures as soon as possible … and that’s prompting a bit of a rebound in the mining sector,” CMC Markets senior market analyst Michael Hewson said.
China’s health is a key factor for the FTSE 100, given the mining sector’s heavy weighting. It is the fourth biggest sector within the UK benchmark, accounting for almost 9 percent of the index, data from index compiler FTSE showed.
The FTSE 100 was up 20.75 points, or 0.3 percent, at 6,563.19 points by 0859 GMT, having shed 0.5 percent on Thursday. The UK benchmark is now trading towards the bottom end of a range seen since late October, between 6,400 and 6,800.
“An interesting short-term buying opportunity as China is rumoured to add some stimulus which would benefit especially the large international mining companies,” Hampstead Capital hedge fund manager Lex van Dam said.
The FTSE 100 has this week tested the bottom of its rising channel stretching back to August 2013 at 6,500.
Valerie Gastaldy, head of technical analysis firm Day-By-Day, reckoned there was scope for the index to bounce to 6,684, previously both a support and resistance level, and maybe to the year’s high, around 6,867.
Aircraft parts supplier Meggitt also notched up good gains, ahead 1.4 percent. Traders attributed the advance to an upgrade of the company to “buy” from “neutral” by UBS, with the investment bank arguing that Meggitt’s recent share price fall – down by roughly 10 percent since the start of 2014 – has been overdone.
“We believe that Meggitt can sustain around 6 percent long term profit growth, driven mainly by the commercial aftermarket – largely planes that have already been sold – and the high growth energy sector, where Meggitt’s proprietary technology gives them a performance advantage,” UBS said in a note.
Trading volumes in Meggitt came in at around a quarter of the stock’s three-month average daily volume – above those for the FTSE where volumes only stood at around a tenth. ( C ) Reuters