Anglo American leads FTSE higher, Whitbread slides

LONDON (Reuters) - Britain's top share index climbed on Tuesday, boosted by basic resources stocks, with Anglo American AAL.L leading the market higher after a production update, though a slew of broker downgrades weighed on UK midcap stocks.

A red London bus passes the Stock Exchange in London, Britain, February 9, 2011. REUTERS/Luke MacGregor/File Photo

Anglo American shares were up 4.6 percent, taking its year-to-date gains to more than 270 percent and making it the top performing stock on Britain's blue-chip FTSE 100 index .FTSE and Europe's STOXX 600 .STOXX this year.

The UK mining index .FTNMX1770, up nearly 90 percent this year, rose 3.7 percent to its highest since mid-2015. Shares in other miners including Rio Tinto RIO.L, Glencore GLEN.L, BHP Billiton BLT.L and Antofagasta ANTO.L - up 3 to 4.5 percent on Tuesday - have surged between 16 and 174 percent in 2016.

The mining sector also tracked a rally in industrial metals, with prices of copper CMCU3, aluminium CMAL3 and nickel CMNI3 rising more than 2 percent thanks to a weaker dollar.

“It seems investors are looking past the debt issues that saw mining shares plummet last year,” said Jawaid Afsar, senior trader at Securequity.

Anglo American’s performance, as well as that of the broader sector, is a marked turnaround from last year when a slowing China and high debt sent investors rushing for the exits. Investors have cheered moves to cut costs aggressively and sell assets to bolster balance sheets.

The FTSE 100 index was up 0.5 percent at 7,017.64 points at its close after slipping in the previous two sessions, also helped by a fall in sterling.

Shares in hotel operator Whitbread WTB.L fell 3.7 percent and were the top faller on the FTSE 100 index, after the company said sales growth slowed and margins declined at its Costa Coffee chain, overshadowing a better-than-expected first-half profit.

“The strength of Premier Inn and Costa is being tested, not least by the National Living Wage, which has raised staffing costs,” said Laith Khalaf, analyst at Hargreaves Lansdown.

“If Brexit does precipitate an economic slowdown next year, that will damage the appetite of businesses and consumers to spend money on hotel rooms.”

A spate of broker downgrades weighed on the FTSE 250 .FTMC, which slipped 0.3 percent. The more domestically-focused index is up only 2.6 percent since the vote, once more lagging the blue chip FTSE 100, which is up by around 11 percent since the close of June 23.

Countrywide CWD.L, Laird LRD.L, Howden Joinery HWDN.L, Mitchells & Butlers MAB.L and Aldermore ALD.L all dropped between 3.3 to 7.9 percent, with almost every brokerage citing concerns about a post-Brexit economic slowdown impacting these businesses.

Jefferies mentioned changes in stamp duty as well as uncertainty following the UK’s June vote to leave the European Union as reasons for their downgrade on property services group Countrywide to “hold” from “buy”.

“When we add ‘Brexit uncertainty’ into the mix, potential homebuyers have more reason to play a waiting game with respect to house purchases, and falling transaction levels are a key driver of our estimate cuts today,” analysts at Jefferies said in a note.

Reporting by Kit Rees