Miners led Britain's top share index higher on Tuesday, after fourth quarter economic growth data from China boosted the demand outlook for the sector.
London's blue chip index added 50.26 points, or 0.9 percent to 5,707.70 by 10:58 SA time extending the previous session's 0.4 percent rise and echoing gains in Asian markets.
Miners rallied in tandem with base metal prices after the world's most voracious consumer of commodities reported slightly stronger than expected growth in the last quarter of 2011, although growth was also the weakest in 2-1/2 years.
Gerard Lane, strategist at Shore Capital, said the data suggested growth continued apace across the economy, but he expected the steps taken along the policy easing path initiated a few months ago, to continue through 2012.
Lane sees this as likely to support asset prices in general and emerging market-exposed equities.
The Chinese data helped Rio Tinto, up 2.4 percent, shrug off its near-flat iron ore production growth for the fourth quarter, which was weaker than some expectations.
Integrated oils also rose along with the oil price.
Capital goods firms were boosted after Exane BNP Paribas said it raised its rating on the sector to “neutral” following the stabilisation of its leading indicators (ISM, bond spreads) and a substantial downward revision to consensus earnings per share forecasts.
“Based on geographic (we favour US over Europe) and end-markets analyses, we upgrade Metso, IMI and Smith Group to Outperform and downgrade Cookson and Legrand to Neutral,” the broker said.
London-listed IMI and Smiths Group were up 2.7 and 1.6 percent, respectively, while GKN gained 3.1 percent.
INSURERS, BANKS WANTED
Insurers and banks joined in the broader rally.
Insurance buyout vehicle Resolution rose 3.3 percent after UBS upgraded the firm to “buy” from “neutral” on valuation grounds, in a note on the UK life and non-life insurance sectors.
UBS also put a short-term “buy” rating on blue chip firm RSA Insurance and raised mid cap company Lancashire to “buy” from “neutral”. The two stocks added 0.1 and 3.9 percent respectively.
“Although the outlook remains relatively challenging for life, and unexciting for non-life, we think we have identified promising niches,” UBS said in a note.
“Valuation multiples are not generally demanding and the sector offers an attractive alternative to the banks with limited exposure to the euro area,” the broker said.
The euro zone's debt crisis remained in focus although traders said they weren't surprised when Standard & Poor's followed its credit rating downgrade of nine euro zone nations over the weekend by cutting its credit rating of the area's EFSF rescue fund late on Monday.
And Greece was still under pressure to break a deadlock in debt swap talks if it is to avoid an unruly default.
Royal Bank of Scotland rose 3.9 percent as Shore Capital upgraded the part state-owned lender to “hold” from “sell” following its structural reorganisation last week.
“Although this restructuring could be costly in the short-term, we believe that it will prove to be a sensible move over the medium to long-term, boosting both return on equity and capitalisation,” the broker said.
The lender was also boosted after the announcement of the sale of its aircraft-leasing business to Japan's Sumitomo Mitsui Financial Group and Sumitomo Corp for $7.3 billion.
On the downside, Burberry fell 2.2 percent, giving up the previous session's gains, after the luxury goods firm posted a 22 percent rise in third-quarter revenue.
The shares were also pressured by a note from Bank of America Merrill Lynch which downgraded the European luxury goods sector to “underweight” from “neutral” on valuation grounds, but kept its “neutral” stance on Burberry. - Reuters