Mining stocks buoy FTSE

A huge surge for mining stocks lifted the FTSE 100 Index more than 2% higher today as investors put recent recovery doubts firmly to one side.

The dollar’s weakness pushed up metal and oil prices – with gold reaching a record high – helping the blue-chip index 113.7 points higher to 5138, a gain of 2.3%.

Sentiment was helped by Australia becoming the first major nation to raise interest rates, saying the risk of a major recession was over. Speculation that major countries could also stop using the dollar to price oil also dented the currency.

Wall Street’s Dow Jones Industrial Average meanwhile gained 1.6% early on, as Monday’s data signalling the first growth in the US services sector for more than a year added to the positive mix.

The buoyant mood helped investors in London shrug off a surprise 1.9% fall in manufacturing output during August, underlining the fragility of the recovery. The FTSE 250 also saw gains of more than 2% today.

Among the blue-chips, miners dominated the leaders board – led by silver mining firm Fresnillo, up 10p or 74.5p to 824.5p. As gold touched new heights of 1043 US dollars an ounce, gold miner Randgold Resources added 337p to 4531p or 8%.

Rio Tinto moved up 176.5p to 2740.5p as it signed an investment agreement with the government of Mongolia for the development of a copper-gold complex.

Banks were also higher after Morgan Stanley lifted confidence in the sector yesterday by raising its ratings on a number of US banks.

In the UK, Royal Bank of Scotland added 1.29p to 49.85p, Lloyds Banking Group rose 1.54p to 96.5p and Barclays cheered 8.1p to 369.9p.

Shares in supermarket giant Tesco failed to benefit from the buoyant market, despite half-year underlying profits coming in slightly ahead of market expectations at £1.55bn (€1.7bn).

UK sales growth, excluding petrol, of 2.7% was described by analysts as “sluggish” and resulted in shares dipping 0.7p to 390.7p.

Sainsbury’s, which is due to issue a trading update tomorrow, edged 0.3p higher to 322.9p. The UK’s fourth biggest grocer, Morrisons, eased 3.2p to 275.1p.

Marks & Spencer supplier Northern Foods was the biggest faller in the FTSE 250 Index after it warned margins in its chilled foods division were under pressure. While the company said it remained on course to meet expectations for the year, shares in the Fox’s biscuits firm declined 6% or 4.25p to 67p.

It was closely followed by secure power supplies firm Chloride, which lost 6.2p to 167.4p or 4% after its own trading update, despite lifting orders by 4% to £144 million since the end of March.

The biggest Footsie risers were Fresnillo up 74.5p at 824.5p, Vedanta Resources up 174p at 2086p, Kazakhmys up 91p at 1093p and Tullow Oil up 94p at 1209p.

The biggest Footsie fallers were Shire down 18p at 1053p, Legal & General off 1.1p at 84.35p, Morrisons down 3.2p at 275.1p and RSA Insurance off 0.8p at 132.4p.