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FTSE 100 close: Rio and Vodafone up

By ADRIAN LOWERY
Updated: 12:33 EDT, 4 September 2009

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London shares were firmly on the front foot this afternoon after good US jobless figures meant the market consolidated its gains for the day.

The US Labor Department said employers cut a fewer-than-expected 216,000 jobs in August, although the unemployment rate rose to a 26-year high of 9.7% from 9.4%.

Analysts had expected non-farm payrolls to drop 225,000 in August and the unemployment rate to rise to 9.5%. More gains for mining stocks drove the FTSE 100 index 54.95 points higher to 4,851.7, as the payroll figures allowed investors to think positively on the transatlantic economic recovery.

'It's really a question of people buying back into the market after three days of pullback. They are buying on the strength of the miners and also the financials,' said Jawaid Afsar, a trader at Securequity.

He said Goldman Sachs' upgrade of its DJ STOXX 600 year-end target by nearly 11% to 260 and UBS lifting its forecasts for European corporate earnings for 2010 also improved sentiment.

Lonmin and Kazakhmys set the pace following broker upgrades, rising 9.4% or 136p to 1,578p and 34.5p to 982.5p respectively.

Rio Tinto advanced 70.5p to 2,415.5p as its iron ore boss suspended price talks with Chinese steel mills after its top salesman in China was detained.

There were also modest gains for banking stocks after recent falls on fears the sector may ask investors for cash. Lloyds Banking Group recovered 2.08p to 101.78p, while Royal Bank of Scotland added 0.7p to 55.7p.

Insurers joined in the rally after a turbulent week, with Aviva ahead 15.3p to 402.6p, Legal & General 2.85p higher at 70.9p and Prudential 20.5p stronger at 544.5p. Among other banking stocks, HSBC added 14.3p to 658.3p and Barclays lifted 0.45p to 351.75p.

Vodafone advanced 2.95p to 133.25p after the Financial Times said Deutsche Telekom had held preliminary talks with Vodafone, France Telecom and Spain's Telefonica over the sale of its T-Mobile UK unit.

Among other movers, Reed Elsevier gained 4.9p to 440.6p after Goldman Sachs added the Anglo-Dutch publisher to its 'conviction buy' list. Peer Pearson was up 1.5p 736.5p after Goldman downgraded the Financial Times publisher to 'sell' from 'neutral'. Broadcaster ITV was also downgraded by Goldman, adding 1.11p to 46.79p. But Trinity Mirror surged more than 16% or 22p to 157.25p as UBS predicted cheaper newsprint costs in 2010.

Housebuilders dominated the FTSE 250 Index after Credit Suisse said prospects for the sector appeared brighter, adding that the risks posed by unemployment and poor credit conditions were already factored in to prices.

Barratt Developments jumped 6.4% or 15p to 248.2p, Bellway cheered 18p to 862p, Redrow lifted 9.8p to 240.9p and Persimmon rose 14.8p to 490.1p.

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