A much needed recovery took place on Wednesday after three consecutive sessions of losses. Mining sector strength and bargain-hunting among financials helped London’s leading index recoup some of the 8% drop incurred earlier this week.
The FTSE 100 index closed up 3.8% or 133.78 points at 3,645.87, having hit six-year lows over the previous two sessions, while the FTSE 250 index added 4.0% or 232.78 points to 6,083.51.
A Wall Street rebound also helped drive UK shares as an unexpected decline in oil inventories gave the crude price a boost. The main fuel behind the FTSE 100’s gains, however, was the energy sector as hopes Chinese Premier Wen Jiabao will unveil new stimulus measures tomorrow attracted buyers to mining issues.
Seven of the top ten risers were mining stocks, with Kazakhmys the top performer, jumping 19.6% to 281.75p, followed by Antofagasta, up 19.5% at 501.5p, and Eurasian Natural Resources, 17.2% higher at 370p.
Standard Chartered was the best performing stock outside the resources sector, adding 15.0% to 724.5p as investors crept back into financials and selected Standard following its solid full-year results yesterday. Other banks including Barclays and Lloyds Banking Group gained 5.5% to 86.3p and 4.8% to 47.7p, respectively.
Amongst insurers, figures from Old Mutual that revealed the South Africa-based group failed to perform as well as expected in 2008 led the stock to underperform the broader sector, sliding 0.3% to 37.4p, while peers Prudential and Aviva enjoyed a long-awaited rebound. The Pru took on 12.4% to 276.25p and Aviva rose 10.9% to 285p.
But it was oil & gas producers that accounted for much of the sector’s rise after a US government report showed crude inventories unexpectedly fell last week, fuelling an almost 8% jump in oil prices to $45 per barrel on NYMEX.
BP, which was today praised by a number of analysts for its high yield—seen above 9% even if it opts to freeze its dividend, took on 4.1% to 421.25p, while Royal Dutch Shell ticked up 6.4% to 1,406p and Tullow Oil skipped 7.2% higher to 715.5p.
With only a few stocks trading in the red on Wednesday, defensives were bound to feature among them as their qualities were not needed in today’s market. Pharma group AstraZeneca was out of favour, losing 1.1% to 2,213p, and medical devices firm Smith & Nephew fell back 0.1% to 460p.
On the economic front, Wall Street shrugged off signs of further slowing in the economy: the Institute of Supply Management’s non-manufacturing index came in at 41.6 in February against 42.9 in the previous month (a reading below 50 represents contraction); and the private sector lost 697,000 jobs last month. In the UK, consumer confidence improved slightly in February but still remained near its lowest level in four years.
The Bank of England’s two-day Monetary Policy Committee meeting got under way today—the meeting will cumlinate in the latest interest rate decision, which is widely expected to be yet another 50 basis point cut to yet another record low of 0.5%.
