By Alistair Smout
London - British blue-chips gained in early deals on Wednesday, with miners leading gains as hopes of policies to stimulate growth in China supported the copper price.
Miners rose 2.6 percent as the copper price hit a seven week high. Chinese Communist Party chief Xi Jinping said on Tuesday that China will make policies more targeted and effective in 2013 to help the economic recovery, according to state television.
“We've had a return to speculation about stimulus (in China), which we hadn't had for a bit of a while, with the focus on the (US) 'fiscal cliff'. That talk has served to give us a bounce back towards those recent highs ... It's normal to see the miners jumping on a rally this morning as a result of that,” Mike van Dulken, Head of Research at Accendo Markets, said.
“There is a lot of bad news already out there, so the potential for good news to come along and help us out is potentially bigger than more bad news to come and spoil the party any more.”
The gains took the index back around the 5,900 level, which it has tested in two of the previous three trading sessions but has failed to break through.
A break was unlikely to be sustained in morning trading ahead of a budget update at 1230 GMT from finance minister George Osborne, who expected to announce further austerity, and UK services PMI out at 0930 GMT, with just 10 percent of the average 90 day volume having been traded.
At 0855 GMT, the FTSE 100 index was up 30.74 points, or 0.5 percent at 5,899.78, with miners adding 15.5 points to the index, and 10 of the top 12 gainers in the materials sector.
Sectors that benefit with economic optimism gained in general, with financials and energy joining miners in the top risers.
HSBC added 5.1 points to the FTSE 100, the most in the index, after selling its stake in China's Ping An Insurance for $9.38 billion.
Another company undergoing a refocusing of its business is Tesco, which gained 3.4 percent after launching a strategic review of its loss-making Fresh & Easy chain in the United States that could lead to a sale or closure of the business.
“Real signs of life in the UK food business and news of a now probable departure from the US outweigh the forecast downgrade from Central Europe,” Oriel Securities said in a note.
“The shares discount bad news only and are starting to look interesting.”
The top three fallers - Severn Trent, Associated British Foods and SABMiller - all went ex-div on Wednesday morning, which automatically hits the share price. In sum, ex-divs took 1.9 points off the FTSE. - Reuters