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Industrials power FTSE to best streak in 7 months

Published 03/30/2011, 12:15 PM
Updated 03/30/2011, 12:24 PM
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* FTSE up 0.3 pct; sixth day of gains best run since August

* Miners, industrials higher as investors buy into growth

* Retailers fall on gloomy outlook; Dixons sounds alarm

By David Brett

LONDON, March 30 (Reuters) - The FTSE 100 closed higher for a sixth consecutive session on Wednesday, its best run since August 2010, as investors ditched retailers over earnings worries in favour of growth sectors such as industrials and mining.

Dixons issued a profit warning and gloomy outlook as a survey from the Confederation of British Industry showed the underlying trend for retail sales remained weak.

Dixons, Britain's No.1 electricals retailer, fell 18.3 percent, while the country's biggest pizza delivery firm, Domino's Pizza UK & IRL Plc, fell 4.2 percent as it reported a slowdown in sales growth.

Next shed 2.6 percent and Marks & Spencer dropped 3 percent as MF Global initiated its coverage on the latter with a "sell" rating, arguing it has a "history of boom and bust", while Oriel cut its earnings forecasts.

Traders said banks weighed on gains ahead of Irish banking stress-test results on Thursday.

Barclays potentially dealt UK Plc a blow. It was reported to be considering moving its headquarters to the United States due to the UK threat of higher capital requirements.

Despite the retail gloom, London's blue-chip index closed up 16.13 points, or 0.3 percent, at 5,948.30.

The index has risen 6 percent since its year-low of 5,591.59 on March 15, rebounding from sharp falls after Japan's earthquake, political trouble in the Arab world and European debt worries.

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Miners, which now trade above their 20- and 50-day moving average, led the gains as investors refocused on stocks that provide hopes for earnings growth.

Vedanta Resources added 3.4 percent, with traders citing a bullish note from Morgan Stanley -- in which the broker says the miner's industry-leading growth is not recognised by the market -- as the catalyst.

INDUSTRIAL SUPPORT

Rolls Royce gained 1.7 percent after HSBC upgraded the aerospace and defence firm to "overweight", citing growth prospects and shrugging off concerns over the impact of high oil prices.

Rolls Royce shares are flat on the year but trade just above their 50-day moving average of around 619 pence, on a forward price-earnings ratio of 13.8 times compared with a sector average of 10.4, Thomson Reuters data showed.

"The updates companies have been giving investors since the oil price picked up have indicated that price can be passed on and that demand is holding up," Colin McLean, managing director at the 650 million pound ($1.04 billion) Scottish Value Management in Edinburgh, said.

He said industrials, tech stocks and chemicals producers look well placed.

Industrials such as IMI and Weir Group, up 1.9 and 1.2 percent respectively, benefitted from an upbeat note on the sector from RBC Capital Markets.

IMI was RBC's top pick but it said Invensys and Smiths Group, down 2.3 and 1.1 percent respectively, may underperform UK peers.

Smiths, Anglo American, British Land, British Sky Broadcasting, Eurasian Natural Resources and Prudential all traded without their dividend attractions.

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Traders said bid talk boosted Centrica, up 2.5 percent on strong volume, with traders citing talk that Spanish peer Iberdrola was set to make a bid.

Traders also cited talk of bid interest in fashion group Burberry, which added 2 percent.

Technical analysts said the index looked set to retest the 6,000 level, with CMC Markets analyst Michael Hewson saying the March high of around 6,040 could be reached, as the index closed above its 55-day moving average at 5,945.

In the U.S., the number of planned layoffs at firms fell in March, providing optimism ahead of Friday's non-farm payrolls.

(Editing by David Hulmes)

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