* FTSE 100 gains 0.7 percent
* Top risers populated by commodity-related stocks
* China inflation data leaves room for monetary easing
* Defensives, led by Diageo, suffer
By Alistair Smout
LONDON, April 9 Britain's top share index rose
on Tuesday, as heavyweight miners led the index higher following
encouraging data out of China and a good start to the U.S.
earnings season in the sector.
Inflation eased off in China, leaving the door open for a
further relaxation in monetary policy in the world's number one
metals consumer, while bellwether Alcoa kicked off the
U.S. earnings season with rising profits.
Miners rose 2.9 percent, gaining for the second
straight day and continuing to recover off 8 month lows set at
the end of last week.
"The mining sector will continue to be driven by the global
macro economic picture, chiefly China, and given some of the
sell-offs we've been seeing, this better data is clearly a
positive for the sector," Henk Potts, equity strategist at
Barclays Wealth, said.
"China consumes 40 percent of the world's industrial metals,
so it's no surprise that commodity and mining stocks are driven
so much by the outlook for China."
At 0802 GMT, the FTSE 100 was up 43.65 points, or
0.7 percent, at 6320.59 points, with mining and commodity stocks
contributing 17 points to the rise.
Eleven of the top 13 risers were drawn from the commodity
sector, with Vedanta helped by an oil discovery at its
Cairn India operations.
In general, cyclical sectors that rise with optimism over
the economy outperformed those seen as defensive plays against
economic uncertainty, with banks climbing 1.1
This counters the unusual theme which has characterised this
year, where defensive stocks have outperformed cyclical
counterparts in rising markets.
The beverage sector has risen 14.5 percent this
year, outperforming the FTSE's rise of 7.2 percent. The broader
market has managed gains in spite of a 9.9 percent slump in the
However, Tuesday saw a rotation out of highly-rated
defensive stocks, with beverages dropping 0.8 percent and Diageo
, up 11.5 percent on the year, down 1.3 percent - the top
FTSE 100 faller.
"This is the point of the year at which we thought investors
would start rotating out of quality defensives, which have
outperformed hugely in the first quarter, which is unusual given
the broader market has seen gains," Jeremy Batstone-Carr,
analyst at Charles Stanley, said.
"Diageo is very highly rated at the moment, and the shrewd
money might be rotating into the mining sector after this very
Diageo's fall came despite price target hikes by both Nomura
and Jefferies. However, it ranks poorly on a range of valuation
scores, scoring just 13 out of 100 on the Thomson Reuters
StarMine Relative Valuation model.
(Editing by Mark Potter)