FTSE extends gains led by defensives, commodities

FTSE extends gains led by defensives, commodities

London: Britain’s top share index was up 0.3% by midday on Wednesday, lifted by defensive and commodity stocks as investor optimism on the economic outlook persisted.

But moves were muted as investors await a rate decision from the US Federal Reserve due later.

By 1059 GMT the FTSE 100 was up 15.84 points at 5158.44, having closed up 0.3% on Tuesday when it set a fresh 2009 intraday peak at 5,189.88.

“Given the speed of the economic recovery coming through we would still advise investors to position their portfolios towards the cyclical side of the market... including industrials and technology... as opposed to classically defensive stocks," said Henk Potts, equity strategist at Barclays Stockbrokers.

However, defensively viewed equities joined a broad-based, if slight, rally as pharmaceuticals GlaxoSmithKline and AstraZeneca added 1.2 and 0.3% respectively, while Imperial Tobacco climbed 1.5% and British American Tobacco was up 0.8%.

Dollar weakness has provided support for metal and oil prices, which has proved the catalyst for the rise in commodity issues.

Among miners, Rio Tinto, Xstrata, Eurasian Natural Resources , Anglo American, Kazakhmys and Fresnillo added 0.3-0.9%.

As risk appetite spread, oils joined the rally. BP, BG Group , Tullow Oil and Cairn Energy added 0.1-1.3%.

Burberry gains

Individual risers included Burberry, which topped the blue-chip gainers, up over 4%, bolstered by bullish comments from chief executive Angela Ahrendts, which added to the positive buzz surrounding the luxury goods retailer.

Banks also benefited. HSBC, Standard Chartered, and Lloyds Banking Group rose 0.3-2.6%.

Bank of England policymakers voted unanimously to keep their asset purchase programme at £175 billion in September, but those who had voted for more in August still thought they had a case, minutes of their meeting showed.

The number of mortgages approved for house purchase in August jumped 81.4% year-on-year to 38,095, according to the British Bankers’ Association.

Britain has probably come out of recession but the pace of recovery in 2010 will be slow, with tight credit and weak domestic demand posing obstacles to an upturn, the Confederation of British Industry said.

On the downside, shopping mall owner Liberty International fell 7.9%, the top blue-chip laggard, as it placed 56.1 million shares to raise funds to restart investment plans mothballed at the height of the financial crisis.

Other property companies were also on the back foot as the Liberty move highlighted funding concerns in the sector. Hammerson, British Land and Land Securities fell 0.9-2.2%.

Four FTSE 100 companies traded ex-dividend on Wednesday, with Aviva, Centrica, G4S, and Petrofac knocking 1.94 points off the blue chip index.

After the London close, attention will turn to the outcome of the latest two-day Federal Reserve Open Market Committee meeting, although no change is expected to US monetary policy.

Ahead of that, investors will watch the latest US mortgage and refinancing indexes to get further evidence on the state of the world’s largest economy.