FTSE 100 close: Resource firms mine a rich seam

By Ed Monk for Thisismoney.co.uk
Updated: 12:13 EDT, 29 May 2009

London shares enjoyed a strong start with resources companies leading the FTSE 100 higher on the back of better economic news from the US.

Market watcher: Will share have a strong finish to the week?

The biggest gainer in early trading was mining firm Lonmin, rising 111p, or 8.4%, higher to 1,428p.

Speculation from Nomura over a potential merger between miners Xstrata and Anglo American saw the duo rise 34.5p to 684p and 88p to 1777p respectively as the sector dominated the risers board.

They were accompanied by Kazakhmys, 3.52% higher at 690.5p, BG Group, 4.54% higher at 1,128p and Eurasian Natural Resources, 5.79% higher at 649p.

With US crude rising above $65 per barrel, on track for its largest monthly gain in more than a decade, oil majors constituted the FTSE's top gainers in early trading.

US stocks finished strongly yesterday, with energy shares boosted by higher crude oil prices. Thanks to firmer metals prices, heavyweight miners also rose, with Rio Tinto, BHP Billiton, Antofagasta and Kazakhmys rising between 1.25% and 5.18%.

Burberry was up 1.75p to 382.5p after CEO Angela Ahrendts confirmed the luxury clothes and accessories firm would open 10 to 15 new stores in both North and South America. New stores are expected in New York, Los Angeles and Boston.

The FTSE 100 closed 30.4 points up at 4417.9.

Sentiment was boosted by Nationwide's house price survey, which showed British house prices rose 1.2% in May, the second time in three months, slowing the annual rate of decline to its lowest since August.

The rise in Nationwide house prices lifted housebuilders, with Taylor Wimpey up 2.75p at 32p, Persimmon 18.5p stronger at 364p and Redrow 5.75p higher at 195.75p.

Data also showed British consumer confidence held steady in May as rising gloom over the economy was offset by an improvement in Britons' expectations for their own finances.

'The market up this morning is fairly much across the board... on the basis of those numbers. It's going to remain the economic figures at centre stage for a while yet,' said Richard Hunter, head of UK equities at Hargreaves Landsdown.

Banks, which were yesterday's biggest fallers, reversed course to climb as the previous day's investor pessimism about the outlook for the financial sector subsided.

'Banks are indeed one of the sectors to be among the first to suffer from any sentiment. We're seeing a bit (of) cautious buying on the banks this morning. The big concern around the banks remains as to whether the are going to be any more traditional recessionary-type writedowns coming through,' Hunter said.

Investors sold bank shares the previous session after the yield on 10-year US Treasuries rose, raising concerns that high borrowing costs could stunt the global economic recovery. Hunter also said.

Barclays was up 3.66% to 297.5p, HSBC climbed 2.06% to 556.5p, Lloyds Banking Group rose 4.62% to 68p and Royal Bank of Scotland was up 2.14% to 38.2p.

Shares in water company Severn Trent dropped 1.75% after its full-year results failed to excite. Severn said profits beat expectations, driven by price increases, increased its dividend and said its cash flow needs were funded for the next two years.