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FTSE rallies as commodities stocks, banks lead

Published 09/17/2010, 04:09 AM
Updated 09/17/2010, 04:12 AM
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* FTSE up 1.0 percent

* Miners, energy firms higher with commodity prices

* Invensys rises on China deal

By David Brett

LONDON, Sept 17 (Reuters) - Britain's top shares rose on Friday, echoing gains on Wall Street and in Asia thanks to banks and commodity stocks, with Invensys the top riser after its rail unit signed a deal with a Chinese company.

By 0753 GMT, the FTSE 100 was up 55.25 points, or 1.0 percent, at 5,595.39, having closed down 0.3 percent at 5,540.14 on Thursday, its second consecutive daily decline.

The FTSE tracked gains on Japan's Nikkei average, which rose 0.8 percent on Friday, and a late rally on Wall Street, where stocks closed little changed on Thursday but recovered from early weakness after a cautious forecast from economic bellwether FedEx.

"Investors are increasingly seeing Asia as the key driver of market sentiment," said Ed Woolfitt, head of trading at Galvan.

Miners rallied in tandem with metal prices, wiht Kazakhmys and Xstrata up 2.0 and 1.8 percent respectively.

Gold surged to a record and silver struck a new 2-1/2-year high, helping precious metals miners Fresnillo and African Barrick Gold rise 0.6 and 1.2 percent respectively.

Banks which had softened in the previous two session's were back on the front foot as risk appetite returned among investors, with Lloyds Banking Group 1.8 percent higher.

Energy firms were again a major force on the upside, with the crude price rebounding and oil major BP up 1.3 percent.

Centrica rose 1.1 percent after it doubled its stake in the North Sea's Statfjord Field in a 144 million pound ($224.6 million) deal that provides the British Gas owner with an additional 172 billion cubic feet of oil and gas reserves.

INVENSYS SIGNS CHINA DEAL

Engineering group Invensys was the top FTSE riser, up 5.9 percent after the firm announced its rail unit had signed a deal with Chinese manufacturer CSR, increasing its exposure to the rapidly growing Asian economy.

"We expect further collaborations to be announced which would logically cover mainline and high speed and this, in turn, underlines the pivotal position Invensys rail is developing for itself," Evolution Securities said in a note.

On the downside, private equity firm 3i Group fell 1.1 percent after it said Jonathan Russell, one of its top dealmakers, would leave as part of a shake-up announced on Friday that will combine two of its key divisions.

A downgrade to "neutral" from "add" by Evolution Securities also weighed on 3i.

No important domestic economic data are scheduled for release on Friday so investors' focus will switch across the Atlantic.

August U.S. consumer prices data are due at 1230 GMT and the preliminary reading of September Reuters/University of Michigan consumer sentiment is scheduled for 1355 GMT.

Britain's top share index is expected to barely rise between now and the end of 2010, but will bounce 8 percent by mid-2011 as support from overseas earnings offsets worries about the economy, a Reuters poll showed.

"We are sticking with our year-end target of 6,000 for the FTSE 100," Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers, said.

"We've got the third-quarter reporting season coming along and if that exceeds expectations as the first and second did and there is proof of earnings momentum, then we could see a strong end to the year."

(Editing by Michael Shields)

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