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FTSE closes up 1.2 pct; miners, oils surge

Published 11/02/2009, 12:13 PM
Updated 11/02/2009, 12:15 PM
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* Miners and energy firms gain on stronger commodity prices

* Stong manufacturing from U.S. and China lift sentiment

* RBS down as lender faces forced sales

By Harpreet Bhal

LONDON, Nov 2 (Reuters) - Britain's top shares closed 1.2 percent higher on Monday, as miners and oil firms rose, underpinned by firmer commodity prices on the back of bullish economic data, while RBS fell as the lender faces asset sales.

The FTSE 100 closed 59.95 points higher at 5,104.50 points, recouping some losses from Friday's 1.8 percent fall.

The index was down 1.7 percent overall in October, the first monthly drop since June, but is still up about 48 percent since its March low.

Miners were supported by strong manufacturing data from the United States and China which reinforced the view that a recovery in demand was under way. Eurasian Natural Resources, Vedanta Resources, Lonmin and Rio Tinto rose 4.5 to 5.5 percent.

Rising to the top of the gainers list, Randgold Resources added 6 percent after it agreed with AngloGold Ashanti to buy an additional 20 percent in the Moto gold project in the Democratic Republic of Congo for about $113.6 million.

Equities drew strength from data showing the U.S. manufacturing sector grew in October for a third consecutive month and at a faster pace than expected.

In the UK the CIPS/Markit purchasing managers index of manufacturing activity rose at its fastest rate in two years and new orders rose at their fastest in almost six years.

Meanwhile, HSBC's China Purchasing Managers' Index (PMI) rose to an 18-month high in October of 55.4, pointing to sustained strength in the fast-growing manufacturing sector.

Analysts say the market will focus on the Bank of England's next policy meeting on Thursday, with two-thirds of economists polled by Reuters expecting the central bank to extend its 175 billion pound quantitative easing programme.

"The market is waiting for direction at the end of the week when we'll know if quantitative easing is going to be extended," said Tim Whitehead, head of portfolio strategy at Redmayne-Bentley.

"That's the big news this week and as a consequence I wouldn't expect the market to make a great deal of headway in the short term," he said.

Oil majors edged up as crude prices rose above $78 a barrel. BG Group, BP and Royal Dutch Shell added 0.3 to 1.9 percent.

BANKS MIXED

Royal Bank of Scotland fell 7.8 percent after the part-nationalised lender said talks with the European Commission over its state aid will include some divestments not initially contemplated.

Lloyds Banking Group, also part-owned by the government, was off 2.3 percent as investors awaited developments with regards to a planned capital raising.

Across the Atlantic, the Federal Reserve said U.S. banks face risks from souring loans, particularly from commercial property, and some banks may face capital adequacy problems.

Gains in Barclays and heavyweight HSBC, up 2.5 and 2.4 percent respectively, provided some strength to the UK banking sector.

Some nerves ahead of quarterly earnings reports put pressure on selected blue chips. British Airways fell 1.1 percent before its results on Friday, when analysts expect the airline to report widening second-quarter losses.

The carrier also came under pressure after falls in European budget airline Ryanair, made no upward revision to its full-year profit forecasts.

Hammerson, which reports on Tuesday, dipped 3.5 percent, while Liberty International and Segro, which also report results this week, shed 2.8 and 3.1 percent respectively. (Editing by David Holmes)

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