FTSE 100 close: Commodities drive 113-point surge

By Adrian Lowery
Updated: 12:54 EDT, 6 October 2009

It was an exceptional day of gains for the Footsie today as higher metal and oil prices drove world share prices higher.

The FTSE 100 index closed 113.6 points ahead at 5,137.9, after early gains for UK shares were boosted further by a strong open on Wall Street.

The Dow Jones industrial average was 148.12 points higher at 9,747.87 by the London close, following survey evidence of the first growth in the US services sector for more than a year on Monday.

The news was less upbeat in the UK following a shock slump in manufacturing, down 1.9% in August against an expectation of a rise of 0.3%.

David Buik, of brokers BGC Partners, pointed out that today's rally lacked broad support. He said: 'Mining contributed 35 points, oil and gas 35 points and banks 19 points - 78% of the market rally.'

He added: 'The Footsie bears no resemblance as a barometer to the performance of the UK's economy, as was witnessed by today's awful industrial production numbers.'

In London, Kazakhmys was the top gainer, with a 9% jump of 91p to 1,093p, and was closely followed by Randgold Resources, 337p up at 4,531p.

Rio Tinto moved up 176.5p to 2,740p as it signed an investment agreement with the government of Mongolia for the development of a copper-gold complex.

The banks were helped by an upgrade to the sector to 'overweight' by Bank of America Merril Lynch strategists, who pointed to a healthy financial backdrop and strong earnings trends.

RBS was 2.6p up at 49.85p and Barclays was 8.05p up at 369.85p. Standard Chartered, which received a target price hike from Credit Suisse to 1,185p from 1,600p, was up 59p at 1,551p. Morgan Stanley also lifted confidence in the sector yesterday by raising its ratings on a number of US banks.

Rolls-Royce added 19.8p to 475.3p after Citi upgraded its outlook on the firm to 'buy' from 'hold' and lifted the stock's target price to 550p from 465p.

Shares in supermarket giant Tesco fell despite half-year underlying profits coming in slightly ahead of market expectations at £1.55bn. UK sales growth, excluding petrol, of 2.7% was described by analysts as 'sluggish' and resulted in shares falling 0.7p to 390.7p.

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

Drug-maker Shire Pharmaceuticals shed 18p to 1,053p, pressured by a UBS downgrade on valuation grounds to 'neutral' from 'buy'.

Marks & Spencer supplier Northern Foods was the biggest faller in the FTSE 250 Index after it warned margins in its frozen 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 4.25p to 67p.

It was closely followed by secure power supplies firm Chloride, which lost 6.2p to 167.4p or 3.6% after its own trading update, despite lifting orders by 4% to £144m since the end of March.

In small caps, shares in European Goldfields rose 22% or 64p to 345.5p after the company reports the 'successful' conclusion of the principal phase for its Skouries and Olympias Projects in Greece.

However, Evolution Securities highlights that the approval process is not yet complete and the company is still 'burning cash while it treads water', forecasting a 20% reduction in cash for full-year 2009.

'Should the final outcome be positive, the company will then have to finance these mines,' it says.

NEWS DUE TOMORROW:

• J Sainsbury is expected to beat Tesco when it reports second-quarter trading figures tomorrow, with analysts predicting like-for-like sales - excluding fuel - to have risen by between 4% and 5%.

• The outlook for the job market will become a little clearer when recruitment group Michael Page international posts its third-quarter update.