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Banks, miners pull FTSE up on recovery hopes

Published 08/13/2009, 07:29 AM
Updated 08/13/2009, 07:30 AM
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* FTSE 100 hits new 2009 intra-day high

* Fed comments, eurozone data underpin recovery hopes

* Miners buoyed by firmer metal prices

* Banks extend Wednesday's rally

* Insurers up; Prudential H1 pleases

By David Brett

LONDON, Aug 13 (Reuters) - Britain's top share index was 1.5 percent higher by mid-session on Thursday, led by banks and miners, as positive GDP figures in Europe underpinned comments from the U.S. Federal Reserve that the worst of the recession could be over.

By 1109 GMT, the FTSE 100 was up 69.66 points at 4,786.42, a new intra-day peak for 2009. The index closed 45.42 points higher on Wednesday snapping a two-session losing streak.

The euro zone economy shrank less than expected in the second quarter, data showed on Thursday, adding to signs the worst of the recession could be over.

Earlier, both Germany and France suprised many commentators by posting a rise in their respective second quarter GDP figures.

Mining stocks dominated the FTSE 100 risers chart, underpinned by firmer metals prices on increased demand hopes.

Lonmin, Rio Tinto, Kazakhmys and Xstrata put on between 4.9 and 6.6 percent.

The euro zone figures came hot on the heels of bullish noises from the Federal Reserve late on Wednesday, which said the U.S. economy was levelling out.

The Fed. left its interest rates unchanged and extended the duration, although it did not increase the size, of its programme to buy long-term government debt..

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"It seems this upward momentum has no end in sight just yet. There was a feeling yesterday that gains were being kept on a leash as investors waited for the Fed's interpretation of the U.S. economic recovery, and now that leash seems to have been let go," said Joshua Raymond, market strategist at City Index.

Banks also benefitted from the feel good factor, building on Wednesday's gains, with Barclays, HSBC, Royal Bank of Scotland and Lloyds Banking Group up 1.6-3.7 percent.

Insurers were also in demand. Prudential climbed 7.5 percent as it raised its interim dividend after reporting a smaller-than-expected drop in half-year profit, and said its capital position remained strong.

"The (Pru) numbers are much better than consensus," said ING analyst Kevin Ryan.

The results provided a platform for other insurers to move higher. Aviva Legal & General, Old Mutual and Standard Life added 1.8 to 3.9 percent.

OILS MIXED, DEFENSIVES DRAG

Energy stocks were mixed, with Royal Dutch Shell, down 0.4 percent, dragging the sector lower as traders banked profits following gains on Wednesday.

Oil rose towards $72 a barrel on renewed optimism that the U.S. economy was through the worst of the recession, which offset bearish U.S. inventory data showing continued weak demand.

Cairn Energy, Tullow Oil added 0.5 and 0.6 percent, respectively, whilst BP and BG Group were flat.

Oil and gas services firm Petrofac was a big blue-chip riser, up 5.6 percent as the stock was added to the MSCI UK index.

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Weakness was seen among defensive stocks, with food producers and pharmaceutical weighing on the index, as investors turned away from perceived safe bets amid growing optimism over the pace of economic recovery.

Cadbury, Associated British Foods and Unilever dipped 0.7 to 1.0 percent, while GlaxoSmithKline dropped 0.9 percent.

Thomas Cook was the biggest FTSE 100 faller, losing 4.6 percent after saying it expects to miss its operating profit target of 480 million pounds ($788.9 million) in 2010 because of tough market conditions.

KBC Peel Hunt cut its rating for Thomas Cook to "hold" from "buy" following the update.

Investors were awaiting July U.S. retail sales numbers, due for release at 1230 GMT, with a 0.7 percent month-on-month rise forecast, after June's 0.6 percent increase. ($1=.6084 Pound) (Editing by Simon Jessop)

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