* Blue-chip FTSE 100 index rises 0.2 percent
* UK mining index up 2 pct, hits 1-week high
* Vodafone advances on M&A news in the sector
By Atul Prakash
LONDON, Aug 9 (Reuters) - Britain’s top share index rose on Friday as mining shares hit a one-week high after stronger factory data from China, the world’s top metals consumer, raised prospects for raw materials demand.
Sentiment also improved after Britain’s construction output grew more than expected in the second quarter, while June’s trade deficit in goods narrowed, reviving expectations of a broader economic recovery.
The UK mining index, which includes heavyweights such as global diversified miners Rio Tinto and BHP Billiton, climbed 2 percent to top the sectoral gainers’ list after China’s factory output grew in July at its fastest pace since the start of the year.
“The mining sector is one cyclical that has been left behind in the last 12 months on disappointing China data. The reaction that we have seen to some recent encouraging numbers from China highlights that investors may have got too pessimistic on China and as a result a little bit of good news here is going a long way,” Robert Parkes, equity strategist at HSBC, said.
“We expect that we will not see a hard landing in China. We see the economy stabilising in the second half of this year.”
China’s factory data, which followed recent forecast-beating trade numbers, raised expectations the world’s second-biggest economy was coming back on track after more than two years of slumping growth and that metals prices could recover. Prices of copper, aluminium, nickel and zinc rose 0.7 to 2.1 percent.
The UK mining index has surged more than 16 percent in the past month, but is still down 16 percent this year. Rio Tinto, which according to Morgan Stanley research makes around 46 percent of its revenues in China, gained 1.8 percent, while Randgold Resources was up 3.6 percent.
The blue-chip FTSE 100 index was up 10.43 points, or 0.2 percent, at 6,540.11 points by 1005 GMT. It is up more than 11 percent so far this year.
The index was also supported by news that house prices in England and Wales reached an all-time peak in July and construction output grew more in the second quarter than first thought.
“Construction output numbers may reaffirm that (Finance Minister) George Osborne’s ‘Help To Buy’ scheme is going to boost house building and lead into infrastructure projects too,” Tom Robertson, senior trader at Accendo Markets, said.
Merger and acquisition news also underpinned the market.
Vodafone rose 1.7 percent, with sentiment on the telecoms sector boosted after Mexican billionaire Carlos Slim’s America Movil made a 7.2 billion euro ($9.6 billion) bid for the shares in Dutch group KPN it does not already own. KPN shares jumped 16 percent. (Editing by Ruth Pitchford)