London: Britain’s leading share index rose 1% in early trade on Tuesday, buoyed by a rebound in commodity issues which gained strength from a rise in metals and oil prices, while defensive utilities lost ground.
By 0817 GMT the FTSE 100 was up 48.64 points at 5,183.00, after closing 0.7% lower on Monday to end a six-session winning streak.
Miners added the most points to the index as metals prices turned positive. Fresnillo, BHP Billiton, Kazakhmys, Lonmin, Rio Tinto, Xstrata and Vedanta Resources rose 2.4 to 4%.
The FTSE has rebounded close to 50% since the lows hit in March, and is on track to post the best quarterly gains since the index was launched in 1984. Trading, however, was subdued at just 9% of the average 90-day trading volume.
“Nobody seems to be understanding the rally very well. Because we’ve had so much momentum people are very reluctant to short it,” said Arifa Sheikh-Usmani, equity trader at Spreadex.
“Generally there is a sense that the market has overheated a little and might just stagnate for a while,” she said.
Investors will be keeping a close eye on a two-day US Federal Reserve meeting which begins on Tuesday, and a G20 meeting at the end of the week.
Oil majors advanced as crude prices rose above $70 a barrel on a technical rebound from a 3.2% decline. BG Group, BP , Cairn Energy, Royal Dutch Shell, and Tullow Oil were up 1 to 2.8%.
Among other gainers, Carnival rose 2.8% after Banc of America-Merrill Lynch added the firm to its “Europe 1” list.
Imperial Tobacco rose 0.6%, after the world’s No. 4 cigarette group said its current-year trading remained in line with its own expectation.
“We continue to see Tobacco as the most attractive of the European Consumer Staples sectors, and Imperial ... remains the best way to play the space,” RBS analysts wrote in a note.
Cadbury edged up 0.4%. The confectionary firm has approached the UK takeover panel to ask Kraft Foods to either make a formal takeover proposal or walk away for six months, the Financial Times said, citing people close to the matter.
On the downside, Severn Trent declined 2.4% on worries about a possible rights issue, sparked by Monday’s downgrade of the stock by Evolution Securities to “add” from “buy”.
Fellow utility firms Centrica, National Grid and United Utilities shed 0.1 to 1.7%, under pressure from demand for riskier assets at the expense of defensive issues.
Defensive food retailers were also lower, with supermarket chains WM Morrison and J Sainsbury losing 0.4 and 0.5% respectively, while Tesco was flat. With a lack of UK economic data on Tuesday to give direction to the market, only the US monthly house prices data for July is likely to generate some interest at 1400 GMT.