UPDATE 1-Babcock bucks weak trend as Britain's FTSE posts quarterly drop

Mon Mar 31, 2014 12:30pm EDT

* FTSE 100 down 0.3 pct; down 2.2 pct over quarter

* Babcock nearly recoups last week's losses

* Miners extend gains slightly on China stimulus optimism (Recasts, updates prices, adds fresh quote)

By Tricia Wright

LONDON, March 31 (Reuters) - Babcock was the star performer among Britain's top shares on Monday as a nuclear contract win helped it outperform a lacklustre showing on the broader blue-chip index, which suffered its first quarterly drop since June.

The British benchmark ended down 17.21 points, or 0.3 percent, at 6,598.37 points, after a see-saw session which saw it trade between 6,583-6,658, leaving it down 2.2 percent for the year on the last day of the first quarter.

Traders saw Monday's trade as emblematic of the index's torrid start to the year, with concern over the economic impact of tension between Russia and the West, as well as weaker data from the United States and China, having knocked sentiment.

"It's been a choppy first quarter anyway and I think there's (been) some rebalancing going on before we go into the second quarter," Manoj Ladwa, head of trading at TJM Partners, said.

Among bright spots, Babcock rose 4.3 percent in heavy trade after the engineering contractor and its U.S. peer Fluor were named preferred bidders for a 14-year, 7 billion-pound ($11.7 billion) contract to manage the decommissioning of Britain's nuclear sites.

The gains on Monday saw the stock almost recoup its losses from last week when Babcock announced a big rights issue to fund the acquisition of helicopter firm Avincis.

"Positivity in the stock from what I call 'gold-plated government contracts' (on account of both prestige and value) should extend the share price to my six-month target of at least 1,550 pence," said Jordan Hiscott, a senior trader at Gekko Global Markets. The shares closed on Monday at 1,347 pence.

Trading volume in Babcock stood at 5-1/2 times its 90-day daily average. Turnover for the British benchmark as a whole was 1-1/5 times its daily average.

Mining companies rose 0.3 percent. That took their rally since their March 20 low to around 5.5 percent.

A string of weak economic data from China has led to expectations the government will try to boost demand in the world's largest metals consumer. The Chinese premier said last week China could act to support infrastructure investment.

But the sector retreated from an intraday peak as copper stalled after earlier hitting a two-week high.

"A bit of a bounce in the sector...just on hopes that commodity prices will get a fillip from the Chinese stimulus - although actually metals prices haven't bounced as much as we might have expected, which I think is why the markets are generally just tailing off," said Matt Basi, head of sales trading at CMC Markets.

"Until we've got further clarity on what's going to happen...it's probably wise for people just to be a bit more cautious and take a bit of money off the table."

Rio Tinto led the miners higher with a 1.8 percent gain, as Credit Suisse reiterated the stock on its "focus" list.

"Potential for shareholder returns at Rio Tinto is larger and could be sooner than any of its peer group including BHP," analysts at Credit Suisse wrote in a note. (Additional reporting by Alistair Smout)

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