* FTSE 100 index rises 1.1 percent
* Miners bounce after Rio update, China data
* Meggitt up 8.4 pct on report of possible bid
By Atul Prakash
LONDON, July 16 Britain's top share index
climbed to a one-week high on Wednesday, with engineering firm
Meggitt surging on bid speculation and miners rallying after a
strong update from Rio Tinto and encouraging growth data from
The FTSE 350 mining index jumped 2.5 percent to
a 4-1/2-month high, making it the sector that gained the most in
the FTSE 350 index, which rose 1.1 percent. The FTSE 100
was also up 1.1 percent at 6,782.12 points by 1413 GMT.
Miners got support from data showing growth in China, the
world's biggest metals consumer, beat expectations and after
miner Rio Tinto, up 2.9 percent, reported a sharp rise
in iron ore output in Australia.
"We are overweight on the sector as miners are attractively
valued and offer a very good dividend yield," James Butterfill,
global equity strategist at Coutts, said.
"And it's a contrarian call because there has been a
negative sentiment following some disappointing numbers from
China in the past and concerns over the capital expenditure
programmes of mining companies. We are now witnessing a greater
capital discipline and more focus on shareholders."
The market was also helped by an 8.4 percent surge in
Meggitt shares to 531.5 pence. Citing dealers, the
Daily Mail wrote that the U.S. company United Technologies Corp
may be preparing a 625 pence cash offer for the British
engineering firm, which is a key player in the aerospace sector.
Meggitt declined to comment. A spokeswoman for United
Technologies could not be reached for comment.
The prospect of a bid led speculative sellers to close their
short positions, or bets against the stock, traders said. The
shares had fallen nearly 9 percent since late June.
"I don't think there will be a huge amount of people going
long on the back of this, but people who were short would be
scrambling to cover," said Mark Ward, head of execution trading
at Sanlam Securities UK.
Short sellers borrow a stock and sell it, expecting to buy
it back at a lower price before returning it to the lender. Over
the past month, they have targeted Meggitt - around 5.7 percent
of its shares available to be borrowed were out on loan on June
14, up from 0.4 percent on June 10, Markit data showed.
Meggitt was the top riser on the FTSE 100 index, which
climbed to its highest since early July and recouped most of its
losses from Tuesday, when U.S. Federal Reserve Chair Janet
Yellen voiced concern over valuations.
On the economic front, the market showed little reaction to
a report that Britain's unemployment rate fell to its lowest
since late 2008 in the three months to May, but pay grew less
than expected. Employment reports usually are closely watched
for clues about the timing of a rate hike. ID:nL9N0MN00B]
"The figures do not suggest any immediate change in MPC
thinking, as the rise in average wages was somewhat subdued,
admittedly influenced by unfavourable base effects," Nick
Beecroft, senior market analyst at Saxo Capital Markets, said,
referring to the Bank of England's Monetary Policy Committee.
"I continue to expect a rate rise in Q4 2014."
(Additional reporting by Francesco Canepa; Editing by Raissa