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Rally in banks and miners lifts Britain's FTSE
October 24, 2013 / 11:13 AM / 4 years ago

Rally in banks and miners lifts Britain's FTSE

* FTSE 100 rises for 10th time in 11 sessions

* Banks bounce bank after ECB review hit

* Miners lifted by China data

* WPP a bright spot in mixed earnings picture (Adds quotes, detail, updates prices)

By Alistair Smout

LONDON, Oct 24 (Reuters) - Britain’s main share index rose on Thursday for the 10th time in 11 days, boosted by a rebound in banking stocks and strength in the mining sector following a pick-up in manufacturing in China.

Banks were among the top gainers, up 0.8 percent, although they failed to fully regain ground lost on Wednesday after the European Central Bank outlined stress tests for regional lenders that were tougher than expected.

The ECB said it would review the quality of a broad range of assets held by top European banks next year, which could mean lenders have to raise fresh capital.

“The kneejerk reaction yesterday was to send the sector sharply lower ... but with time to reflect, investors are trying to assess which banks might be relatively less impacted, and the UK-domiciled names fall into that camp,” said Jeremy Batstone-Carr, analyst at Charles Stanley.

Euro zone exposed names such as Lloyds and Royal Bank of Scotland gained 2.1 percent and 1.8 percent respectively, having fallen furthest in the previous session.

The blue-chip FTSE 100 index was up 0.5 percent or 35.54 points, at 6,710.02 points by 1044 GMT, with financials accounting for a third of the index’s rise

Mining stocks were also higher, buoyed by a rise in the flash Markit/HSBC Purchasing Managers Index (PMI) for China to a seven-month high in October.

Numis analyst Cailey Barker said the Chinese manufacturing data, along with expectations that the U.S. Federal Reserve is unlikely to scale back economic stimulus measures until early 2014, would support mining stocks in the months to come.

“The number shows expansion in manufacturing which is likely to continue into Q4,” said Barker. “Strong PMI numbers coupled with the view that the Fed is unlikely to taper until Q1 should see mining companies have a strong run into the new year.”

Rolls Royce was the top riser, up 2.3 percent after the industrial firm won a contract with Samsung Heavy Industries, while shares in advertising group WPP rose 2.4 percent after it beat forecasts with revenue growth.

Despite WPP’s encouraging report, the earnings season in Britain has been mixed, with 50 percent of companies meeting consensus forecasts and 50 percent missing them.

The rally in equities this year has reflected expanding valuation multiples and not an improving earning picture, Deutsche Bank said in a note, and may not be sustainable if earnings do not improve.

“There are one or two bright spots, but in the round the trend in earnings trends remains to the downside,” Charles Stanley’s Batstone-Carr said. “The push higher that we have seen is reliant on the corporate sector delivering (soon), and I don’t think it can deliver to the extent implied by valuations.” (Additional reporting by Sudip Kar-Gupta and Toni Vorobyova; Editing by Catherine Evans)

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