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Oils, drugmakers nudge FTSE up, inflation eyed

Published 06/16/2009, 04:19 AM
Updated 06/16/2009, 04:24 AM
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* FTSE adds 0.2 percent

* UK inflation data eyed at 0830 GMT

* Oil and gas producers, drugmakers gain, miners weak

By Harpreet Bhal

LONDON, June 16 (Reuters) - Britain's leading share index gained 0.2 percent early on Tuesday, as energy prices stabilised, boosting demand for oil and gas producers, while defensive drugmakers also gained ground.

By 0802 GMT the FTSE 100 was up 8.20 points at 4,334.91, after two days of losses saw it touch a six-week closing low on Monday.

The index is down 1.4 percent this year, but has surged 26.4 percent since hitting a six-year trough in March, supported by a recovery in banking stocks and miners and energy companies buoyed by quickly recovering commodity prices.

The index slid 2.6 percent on Monday and analysts warn that the rally may have been overdone and a global economic recovery may not be as imminent as previously thought.

"We got far ahead of ourselves," said David Buik, senior partner at BGC Partners.

"The enthusiasm for owning stocks has been over-exuberant and over-zealous.. I wouldn't be at all surprised to see the FTSE end up in negative territory by the end of the day," he said.

After heavy losses on Monday, energy stocks recovered some ground as crude prices stabilised at near $71 per barrel.

Royal Dutch Shell, Tullow Oil and BP added between 1.5 percent and 0.4 percent.

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But miners were still under pressure as metal prices stayed well below peaks since late 2008 set last week.

BHP Biliton, Anglo American and Kazakhmys fell between 1.5 and 1.9 percent as metals prices turned negative.

Defensive pharmaceutical and tobacco stocks were well supported as investors looked to assets perceived as safe bets. AstraZeneca added 0.4 percent, GlaxoSmithKline gained 1.3 percent and British American Tobacco climbed 0.9 percent.

Tesco gained 1.4 percent after Britain's largest retailer met forecasts to post a 9.7 percent rise in first-quarter UK sales.

BT Group added 3.3 percent after Morgan Stanley upgraded the telecoms stock to "overweight" and increased its price target while Serco Group was also among the top gainers, up 3.2 percent after UBS upgraded the stock to "buy".

UK inflation data due at 0830 GMT will provide further evidence of the health of the British economy. Investors expect CPI for May to be at 2 percent on the year for May. (Editing by Hans Peters)

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