* FTSE 100 up 0.4 percent
* Defensives lead market up, continuing pattern of year
* Miners rally from eight-month lows
* FTSE to hit 7,000 by year-end - Citi
By Alistair Smout
LONDON, April 8 Britain's top share index rose
on Monday, bouncing back from two-month lows set in the previous
session, with every sector contributing to the gain as investors
snapped up beaten-down stocks.
Consumer staples were the heavyweight gainers, adding 8.6
points to the index and maintaining a trend this year of
defensive stocks, usually resilient to the whims of the economic
cycle, outperforming in rising markets.
Appetite for the cyclical mining sector was
also strong, buoyed by rising metal prices, and it gained 0.8
percent to rebound from eight-month lows set last session.
Miners usually lead risers in market rallies, but they have
fallen 13 percent so far this year compared with a 6.4 percent
rise on the broader index. The fall has seen the sector erase
all the gains it made after European Central Bank chief Mario
Draghi's pledge last July to do "whatever it takes" to save the
Leading the gainers across the whole index was Eurasian
Natural Resources Corporation, with the miner up 3.7
percent, having surged by as much as 9 percent, after an upgrade
to "neutral" from "sell" by Citi. The volatile stock had been
down 14.5 percent on the year at the end of last week.
"Metal prices have been pretty stable in the last week, and
if you look at some of the miners, could I be buying them here?
Yes, but I wouldn't be putting my entire portfolio into it,"
said Nick Xanders, who heads European equity strategy at BTIG.
"The risks to the cyclicals side are to the downside in
terms of earnings, while the defensives have had massive
outperformance. When telcos and utilities are the outperformers
year to date, that's not a healthy rally if you're bullish."
At 0819 GMT, the FTSE 100 index was up 23.72 points,
or 0.4 percent, at 6,273.50, having shed 1.5 percent on Friday
in its worst session in two months after disappointing U.S. jobs
Supportive monetary policy by central banks globally has
seen investors "buy the dips" in equity markets despite ongoing
Strategists at Citigroup expect 10 percent gains for
European stocks by the end of 2013, advising investors to stay
long despite macro risks, and anticipate the FTSE 100 to finish
the year at 7,000.
However, Citi's top picks are "defensive growth" stocks such
as food and beverage and healthcare, indicating
that they expect defensive outperformance to continue.
Despite this constructive long-term outlook on equities, the
FTSE has traded sideways since the end of January, and some see
poor economic data in Europe and the United States as too
substantial to look through in the nearer term.
Disappointing U.S. non-farm payrolls data helped take the
FTSE 100 below 6,300 for the first time since February on
Friday, and some see this as the beginning of a longer-term
correction in stock markets.
"The uncanny similarity to the Q1-to-Q2 slowdown in data and
equity markets of the past three years does indeed raise the
risk of a correction," Jan Loeys, analyst at JP Morgan said in a
(Additional reporting by David Brett; Editing by Pravin Char)