Commods lead UK stocks higher as China recovers

Thu Nov 22, 2012 7:11am EST

* FTSE 100 index adds 0.5 percent, at 1-week highs

* Miners, energy stocks lead after China PMI data

* SABMiller boosted by emerging markets exposure

* Volume very thin; U.S. markets shut for Thanksgiving

By Jon Hopkins

LONDON, Nov 22 (Reuters) - Commodity stocks helped to propel Britain's leading share index higher for a fourth straight session on Thursday as a return to growth in Chinese manufacturing boosted demand prospects for metals and oil.

The Chinese HSBC Flash Manufacturing PMI rose to 50.4 in November, moving above the 50 mark that separates growth from contraction for the first time in 13 months and offering new signs of recovery in the world's No. 2 economy.

Miners and energy sectors together added almost 10 points to the UK benchmark index, around a third of the total advance, cheered by prospects of stronger future demand from China.

"Miners are leading the charge today after some positive factory data out of China. But I wonder how long the bounce will last, given the fact that the problems in Europe still remain with the latest euro zone services PMI showing its lowest reading since July 2009," said Fawad Razaqzada, market strategist at GFT Markets.

The euro zone economy looks to be heading for its worst quarter since the dark days of early 2009, with the Markit Flash euro zone Composite PMI reading falling to 45.8 in November, down from 46.0 in the previous month.

Meanwhile, British factory orders improved slightly in November, helped by better demand for exports, the CBI's monthly industrial trends survey showed on Thursday. However, the total order book balance of -21, up from -23 in October, was below expectations of a reading of -19.

Strength in exports helped brewer SABMiller to top the blue chip leader board, up 6.6 percent, as strong sales in Latin America drove a 12 percent rise in first-half profits and enabled it to hike dividends.

Richard Curr, head of dealing at CFD specialist Prime Markets, said: "Although the impact of contributions from acquisitions is expected to reduce in the second half, Prime Markets believes that with uncertainties over the (Foster's) acquisition now laid to rest, like a good beer the shares should froth higher and retest year highs before Christmas."

Curr said this view is backed up by an exceptionally strong chart configuration for SABMiller, highlighted by a decisive bounce by the stock from the 200-day moving average.

Volume in SABMiller shares was strong, at nearly 150 percent of its 90-day daily average.

Overall market volume was anaemic, however, at just under 25 percent of the 90-day daily average for the FTSE 100 index, reflecting the absence of U.S. influences, with U.S. markets shut for the Thanksgiving public holiday on Thursday.

At 1149 GMT, the FTSE 100 index was up 30.97 points, or 0.5 percent, at 5,783.00, extending its gains for the week so far to almost 3.2 percent.

That puts it on track to match or beat the year's best week so far, in May, when it gained 3.3 percent.

The rebound from last week's three-and-a-half month lows has somewhat brightened the technical outlook on the UK index, but it continues to lag other European bourses and technical analysis of the index remained cautious.

Over the year, the UK blue chip index is up around 3 percent, compared to a rise of 10 percent on the French CAC and 22 percent on the German DAX.

"The FTSE is testing a key area of resistance between 5,780 and 5,810, so we could see the gains evaporate by the end of the week," GFT's Razaqzada said. (Editing by Stephen Nisbet)