Britain's FTSE 100 up from 2-week lows, miners lead

Written by Reuters | London | Updated: May 31 2013, 09:31am hrs
UK StocksUK Stocks
Britain's top share index edged up from two-week lows on Thursday, with some investors seeing value in previously laggard miners, but low volumes and the small scale of the rise signalled caution.

Precious metals miners Fresnillo, Randgold and Polymetal were among the top gainers, up 6.2 to 4.9 percent and taking heart from a rebound in gold.

Bigger names followed, with some investors turning to what has been the worst performing sector this year as previous favourites such as healthcare and food look over-valued.

Metals and mining is one of the cheapest sectors, trading at just 9.6 times expected next year earnings, compared with 11.2 times for the FTSE 100, according to Thomson Reuters StarMine.

"The unloved miners are starting to take people's fancy again. People are looking for the next opportunity among those who haven't really taken part in this rally," said Jonathan Roy, broker at London Stone Securities.

"But I don't think we are going to get any really big buying before the (U.S.) non-farm payrolls next week ... The market was due a bit of a correction."

The rally in the miners added around 8 points to the FTSE 100, which closed up 29.82 points, or 0.45 percent, at 6,656.99 points after hitting a two-week low at the start of the session.

The gain, though, was modest compared to the 3.6 percent fall from 13-year highs suffered in the previous four sessions on concerns the U.S. Federal Reserve could begin to unwind its stimulus policies in coming months, thus taking away a key support for global equities. The chances of such a move, though, were seen reduced on Thursday by weak jobs data.

Volumes also suggested caution, with only 79 percent of the 90-day average daily volume traded.

Technical charts offered some near-term support, with the FTSE halted for now at the trendline linking the highs from 1999 and 2007, around 6,600 points.

"If this level gives way then a deeper setback is favoured to 6,534/6,555," said Ed Blake, technical analyst at Informa Global Markets.

As long as stimulus from the Fed and other central banks stays in place, though, such a correction is likely to attract fresh buyers, potentially putting a floor under the market within 300 points of current levels.

"I am not looking for anything calamitous like a 10 or a 20 percent correction," Peter Botham, chief investment officer at private bank Brown Shipley.

"The market could trend downwards towards the 6,300 to 6,500 level during the course of the next few weeks - in other words what we think is fair value - before you put money back in again to hopefully get the next leg upwards