FTSE 100 close: Miners dig up gains for Footsie

By Adrian Lowery
Updated: 12:14 EDT, 5 June 2009

Gains for the big mining stocks after Rio Tinto jilted Chinalco at the altar drove the Footsie higher today.

Watching the news: Traders will be hoping for better econmic data today.

The FTSE 100 index closed 51.6 points up at 4,438.6, as the Dow Jones Industrial Average opened 45.8 points ahead at 8,796.0.

Wall St was boosted by encouraging payroll data, which showed that US employers cut 345,000 jobs last month. That is the fewest since September and far less than forecast and lent credence to bullish views on the US economy.

Markets gave the data a cautious welcome although traders also noted a rise in the unemployment rate to 9.4% in the world's largest economy - suggesting firms are still reluctant to hire.

Rio Tinto shares reflected investors' approval of the mining giant's move last night to scrap a planned tie-up with China's state behemoth Chinalco.

The astonishing U-turn follows four months of stinging criticism from investors about the planned £12.4bn alliance. The deal would have handed an 18% stake in Rio over to Beijing, plus control of key mining assets.

Rio desperately needs to raise cash as it struggles to pay down a £23.5bn mountain of debt, and it will now turn to a discounted £9.2bn emergency rights issue and an iron-ore joint venture with BHP Billiton.

'Before when Rio was stuck in a debt bind, risk aversion was high, they couldn't get the money,' said Bernard McAlinden, investment strategist at NCB Stockbrokers, in Dublin. 'But now, the shareholders are willing to put up the money and they can avoid the dilution there would have been with Chinalco.'

Rio Tinto shares rose more than 10% or 281p to 3,001p, and BHP Billiton - which dropped a bid to buy Rio last year - gained 99p to 1,555p. The move to merge their Western Australia iron ore assets is expected to save the two firms some $10bn (£6.2bn).

The other big miners rode up on the pair's coat-tails, as copper prices also neared their highest in more than seven months. Anglo American cheered 105p to 1,857p, Antofagasta 37.5p to 657p and Xstrata 19.5p to 723p. Other gainers in the sector included Vedanta Resources and Eurasian Natural Resources, which added 142p to 1668p and 46.5p to 682.5p respectively.

Among other commodity stocks, BG Group cheered 39p to 1,162p after more success in the Santos Basin field off the coast of Brazil. Prospector Cairn Energy meanwhile added 50p to 2,609p.

Barclays clawed back losses seen earlier this week, with a gain of 7%, or 19p to 285p. But Lloyds Banking Group lost 0.9p to 66.2p as the board faced shareholders at its annual general meeting in Glasgow today, who branded its rescue takeover of HBOS a 'disaster'. The group will also reveal take-up for its £4bn share placing on Monday, which will determine the level of the taxpayer's stake.

The biggest Footsie fallers were Thomas Cook down 10.75p at 214.5p, Hammerson down 12p at 291p, Morrisons off 4.25p at 249.75p and Inmarsat down 8p at 523.5p.

In corporate news, confirmation from FTSE 250 firm Carphone Warehouse that its demerger will complete by next July saw the group fall 1p to to 171.5p.

Housebuilder Bellway fell 13.5p to 644.5p despite announcing signs of a stabilisation in house prices and plans to start snapping up land again, on a selective basis.

The week ahead

On Tuesday next week, investors will be keen to see how Tesco is fighting off the challenge of Morrisons and Sainsbury, who have both been increasing their market share recently, the retailer delivers a trading update.

On Wednesday the market will be hoping for no more surprises from Royal Bank of Scotland when it publishes interims.

On Thursday shareholders will find out how Home Retail Group are performing in relation to rival Kingfisher, while it unveils its latest trading update.