UK shares rise as Turkish rate hike boosts sentiment

Wed Jan 29, 2014 4:14am EST

* FTSE 100 index rises 0.9 percent

* Tracks broad market bounce after Turkey hikes rates sharply

* Miners rally after positive company news

By Atul Prakash

LONDON, Jan 29 (Reuters) - Britain's top share index rose on Wednesday, tracking a rally in global stocks after Turkey sharply hike interest rates to defend its currency, with miners leading the market higher following positive corporate news.

Equity investors, jittery over recent currency turmoil in emerging markets that could affect the pace of the global economic recovery, increased their exposure to riskier assets after Turkey acted to prevent its lira from sliding further.

Analysts stayed cautious on the market's outlook.

"It's a positive knee-jerk reaction to a policy response. But the underlying concern is that domestic demand gets killed because you are tightening monetary policy so aggressively," Graham Bishop, senior strategist at Exane BNP Paribas, said.

"We are cautious. It's not a conducive backdrop for the market to go higher as concerns about valuations, earnings and emerging markets are continuing."

The blue-chip FTSE 100 index, which slipped almost 5 percent last week, climbed 0.9 percent to 6,632.85 points by 0902 GMT.

The mining index gained 2.1 percent, helped by a 5 percent rise in Anglo American to the top of the FTSE 100 after it reported a better than expected rise in iron ore production in the fourth quarter.

Antofagasta rose 4.8 percent after the Chilean miner posted record full year copper productions and said its cash costs for this year would be in line with 2013.

Banking shares were also in demand, with the UK sector index up 1 percent on expectations that the UK housing market will stay strong.

British house prices continued to rocket higher on an annual basis, but the surge slowed in January after the biggest monthly jump in more than four years in December, mortgage lender Nationwide said.

"The UK banks and housebuilders appear to be benefiting from the momentum in house prices and I see that continuing," Gerard Lane, equity strategist at Shore Capital, said.

Bovis Homes was up 1.7 percent, helping the Thomson Reuters UK Homebuilding index to gain 1.5 percent.

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.