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Commods drive 1.5 pct FTSE bounce as Q3 kicks off

Published 07/01/2009, 06:36 AM
Updated 07/01/2009, 06:48 AM
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* Commodity prices lift miners, energy stocks

* Broad based rally as Q3 gets underway * Marks & Spencer up on trading news

By Simon Falush

LONDON, July 1 (Reuters) - Robust commodity prices boosted energy and mining stocks which led a broad-based rally at the start of the third quarter, lifting Britain's top share index 1.4 percent higher by midsession on Wednesday.

Crude rose nearly 2 percent to above $71 per barrel fuelling a rise in heavyweight energy stocks, which added most points to the index.

BP, Royal Dutch Shell, BG Group, Tullow Oil added between 1.2 and 3.1 percent.

By 1027 GMT the FTSE 100 was up 62.45 points at 4,311.66, after closing 44.82 points, or 1 percent, lower on Tuesday at 4,249.21.

The index ended up 8.2 percent on the quarter, the best such performance since the final quarter of 2003, and has gained 22.8 percent since touching a six-year low on March 9.

For a FACTBOX on European stock market performance in the first half of 2009 double click on.

"There was a tremendous rally in Q2, but there are big hurdles... in terms of company earnings and data to clear," said Henk Potts, strategist at Barclays Wealth.

Like energy stocks, miners also benefited from firmer raw materials, with metal prices stronger across the board.

Xstrata, Rio Tinto, Kazakhmys, Eurasian Natural Resources, Anglo American, Lonmin and BHP Billiton added between 5.1 and 2.6 percent.

The blue chip index's level is little moved since the start of May, however, and investors are awaiting more concrete evidence on the prospects for economic recovery before pushing the market substantially higher.

One signal indicating that the economy may soon start to recover came from manufacturing PMI data which showed activity declining at its slowest pace in more than a year while output rose for the first time in 15 months.

The CIPS/Markit purchasing managers' index rose to 47.0 last month from 45.4 in May, the highest since May 2008 and beating forecasts, leaving investors confident to hold onto equities that had made early gains.

"We're seeing sentiment driving the market, if investors like data they buy, if they don't like it they sell," Potts said.

M&S RINGS UP GAINS

Marks & Spencer added 4.4 percent as analysts nudged up their full-year profit forecasts for the iconic high street retailer after it posted a smaller than expected decline in first-quarter underlying sales.

Peer Next also gained, up 2.9 percent.

Banks were broadly higher, as the risk sensitive stocks responded well to increased investor confidence.

Barclays, HSBC, Standard Chartered and Royal Bank of Scotland added 0.5 to 1.6 percent.

International Power was among the top gainers, up 6 percent after news it will sell its Czech business to the Czecho-Slovak investment firm J &T Group for 581 million pounds, helping calm fears over its funding.

U.S. June ISM data will be a focus later in the session, together with May U.S. pending home sales numbers, and the June ADP National Employment report, a precursor to Thursday's crucial U.S. jobs report.

Man Group was the biggest faller among just a handful of stocks in the red, down 5.7 percent after going ex-dividend. Alliance Trust, and Compass Group also lost their payout attractions denting their performance. (Editing by Hans Peters)

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