FTSE Higher as Commodity, Bank Shares Push Ahead

By Jon Hopkins

LONDON (Reuters) – Britain's top share index held firm around midday on Tuesday, led by strength in commodity shares and a bounce by banks, though volumes were thin as the Christmas holidays approached.

At 1146 GMT the FTSE 100 index was up 43.31 points, or 0.7 percent at 5,934.92, close to a fresh 30 month peak reached early on at 5,938.40. Trading volumes, however, were just 20 percent of the 90 day average.

"There is … the very real chance that thinner volumes will exacerbate volatility and this could be precisely the sort of environment that could help the FTSE push out to the big 6,000 level before the year end," said Ben Critchley, senior sales trader at IG Index.

"We also have the Santa rally phenomena that typically serves up some festive cheer for equities around this time of year," added Critchley.

Miners provided the main support for the FTSE 100 around midday as metals prices pushed higher, with copper up at record levels, fuelled by a supply squeeze. Eurasian Natural Resources was the best sector performer, up 2.8 percent.

Rio Tinto gained 2.4 percent amid media reports that Rio is talking to Australian-listed coal miner Riversdale about a higher $3.8 billion takeover bid, ahead of a possible bidding war. 

Energy shares were higher as a sector as crude held firm, with BP and Royal Dutch Shell up 0.4 and 1.3 percent respectively, but BG Group fell 1.4 percent.

Banks bounced back after recent weakness caused by euro zone debt exposure worries, with comments from a Chinese vice premier that China supports efforts by the EU to calm global markets in the wake of Europe's debt crisis helping ease concerns.

Royal Bank of Scotland was the top FTSE 100 riser, up 3.2 percent, while Lloyds Banking Group and Barclays gained 1.5 and 1.1 percent respectively.

Among individual blue chip gainers, Rolls-Royce added 2 percent boosted by an upgrade to "buy" from Citigroup.

AGGREKO LOSES POWER

On the downside Aggreko was the biggest blue chip faller, down 2.4 percent after a target price cut by Credit Suisse, and as investors booked profits in the temporary power supplier after a rise on Monday prompted by a contract win.

Defensively-perceived stocks featured among the main FTSE 100 fallers, reversing Monday's gains as investors risk appetite returned, with telecoms povider BT Group losing 1.2 percent, and drugmaker GlaxoSmithKline down 0.8 percent.

Retailers suffered as fears lingered that the snowy conditions in Britain will impact sales over the key Christmas trading period, with Next down 0.7 percent and Marks & Spencer off 0.4 percent.

British consumer confidence remained steady at its lowest level since July this month as a rise in shoppers' willingness to buy big-ticket items offset growing pessimism over the economy, a survey showed on Tuesday. 

British public sector net borrowing unexpectedly surged in November to its highest on record, due to higher health, defence and EU spending. 

About the author: Reuters

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