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Rebounding banks push FTSE higher, miners gain

Published 04/01/2011, 04:26 AM
Updated 04/01/2011, 04:28 AM

* FTSE up 0.7 percent

* Banks bounce after Ireland debt concerns fade

* Miners rally as China trade data assuages growth worries

By David Brett

LONDON, March 31 (Reuters) - Rebounding banks and rallying miners, boosted by Chinese trade data, helped lift Britain's leading share index on Friday, but traders said lingering uncertainty could cap upside momentum.

Banks bounced back strongly following a sharp sell-off in the auction period on Thursday, when it was announced Ireland's remaining lenders needed to recapitalise to the tune of 24 billion euros ($34.11 billion), putting a 70-billion-euro total price on protecting its banks from future shocks.

"The additional financing is coming from the already agreed drawdowns, so the sell-off at the close last night was a knee-jerk reaction given the timing of the announcement," Martin Dobson, head of trading at Westhouse Securities, said.

Barclays was the top riser up 3.4 percent.

Broker Nomura said: "With macro concerns weighing on trading revenues, we have trimmed investment bank forecasts, but believe much is in the price."

Insurers joined the rally among financials. Old Mutual was up 1.3 percent. It announced Maryland Insurance Administration has approved takeover of its U.S. Financial Life Insurance company by Harbinger Group Inc.

By 0808 GMT, London's blue chip index rose 42.27 points, or 0.7 percent at 5,951.03 having closed down 0.7 percent, at 5,908.76 on Thursday.

Miners were in the ascendency, buoyed by Chinese PMI data, which showed the country's manufacturing sector grew for a 25th straight month, while factory inflation eased.

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The figures cooled fears the country's fiscal tightening measures would impact growth and demand sufficiently from the world's largest consumer of natural resources.

"We highlight the pick-up in the New Orders component of the PMI, suggesting to our minds that despite monetary tightening growth continues apace," said Gerard Lane, analyst at Shore Capital.

"We would suggest that this is good news, and likely to be taken positively by the Chinese orientated stocks within the equity markets."

Rangold Resources added a further 2.5 percent to the previous session's gains when it reported an upbeat update.

BP RALLIES

BP rose 2.5 percent, among the strongest performers on a firmer FTSE 100 after JPMorgan put the oil major on its EMEA analyst focus list and said it is "seriously undervalued" and has a 26 percent upside.

On the downside, private equity group 3i Group fell 3.8 percent after it said a weak performance in the UK had offset strong growth in Northern Europe.

Perceived defensive stocks also weighed on the downside with International Power and Smith & Nephew, Europe's largest artificial knees and hips maker, each off 0.4 percent.

Drugmaker GlaxoSmithKline underperformed the market, up just 0.1 percent despite UBS citing it as its key pick in as it upgraded the European pharmaceuticals sector to overweight.

Despite gaining more than 6 percent in the past two weeks from its March low of 5,591.59, the FTSE is flat on the year, and traders said continuing uncertainty will limit extravagant moves on the upside.

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"The market's in a very tentative state with the potential for further problems in Europe, and the volatility could well come back into the market," Westhouse's Dobson said.

"There is potential for decent earnings from companies coming out in the second-quarter but I think we're in a state of flux."

On the economic front, UK manufacturing PMI data for March, is due for release at 0828 GMT, ahead of the eagerly anticipated U.S. non farm payrolls later in the session. (Editing by Hans Peters) ($1=.7035 Euro)

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