* FTSE 100 closes up 0.7 pct
* U.S. ISM non-manufacturing data better than forecast
* Miners helped higher by positive broker comment
By Tricia Wright
LONDON, Oct 5 (Reuters) - Britain’s top share index closed 0.7 percent higher on Monday after U.S. ISM non-manufacturing data came in better than forecast, with heavyweight UK miners and banks the best performing sectors.
The FTSE 100 .FTSE closed up 35.63 points, or 0.7 percent, at 5,024.33, after tumbling nearly 60 points on Friday to a near three-week closing low below the 5,000 level.
Activity in the U.S. service sector expanded in September for the first time since August 2008, while employment in the sector also improved, the Institute of Supply Management said on Monday. [ID:nN05400003]
“An absence of seriously bad news has kept things on a reasonably level footing after a torrid two days last week,” said Howard Wheeldon, strategist at BGC Partners.
Miners, particularly sensitive to improvement in the economy which heralds increased demand for commodities, added the most points to the index, helped by some positive broker comment.
In a sector review, RBS upgraded its base metal price forecasts leading it to raise targets and estimates across the board and upgrade ratings for four firms to “buy”.
Rio Tinto (RIO.L), BHP Billiton (BLT.L), Antofagasta (ANTO.L) and Vedanta Resources (VED.L) rose between 1.9 and 3.7 percent, buoyed by RBS’s recommendation upgrades, with the broker saying it expected sovereign wealth funds to be the next “predators” for the sector.
RBS said that as the recovery process got under way, mining assets could fall under China’s radar as the country looked to broaden its overseas direct investment in mining by between $8 billion and $25 billion for the next five years.
Banks were higher, rebounding after recent falls, led by Royal Bank of Scotland (RBS.L), up 4.1 percent, with HSBC (HSBA.L), Barclays (BARC.L), Lloyds Banking Group (LLOY.L) and Standard Chartered (STAN.L) 0.2 to 1.4 percent firmer.
RBS is set to meet investors this week to tie up the minutiae of a 4 billion-pound share placing as talks with the Treasury about joining the toxic loans insurance programme intensify, the Daily Telegraph newspaper said.
Barclays is set to enter into exclusive talks with insurer Standard Life SL.L to negotiate a 250 million pound deal to purchase its banking division, the Mail on Sunday paper said.
Elsewhere among financials, general insurer RSA (RSA.L) was a big blue-chip riser, up 4.3 percent after a weekend newspaper reported it had scrapped plans for a rights issue to fund major M&A and would instead refocus on smaller, bolt-on deals.
The shares were also helped by a note from analysts at Cazenove, who reiterated their “outperform” rating on the stock and argued RSA’s valuation is undemanding. [ID:nL5452240]
UK economic data also showed signs of economic recovery.
Britain’s service sector expanded at its fastest pace for two years in September and firms were more optimistic about the next 12 months than at any time since April 2007, purchasing managers’ data showed. [ID:nLAG003818]
A survey from the Confederation of British Industry showed nearly a third of 89 UK finance firms reported a rise in business volumes in the three months to Sept. 2, against 24 percent reporting a decline, giving a balance of 7 percent.
Editing by Nigel Stephenson