Miners boost London stocks after solid China data

(Reuters) - London stocks closed higher on Friday, as a jump in China’s factory output for the first time in 2020 powered resource companies, but the benchmark indices ended the week lower as fears of the economic fall-out of the coronavirus weighed.

FILE PHOTO: The London Stock Exchange Group offices are seen in the City of London, Britain, December 29, 2017. REUTERS/Toby Melville

The commodity-heavy FTSE 100 .FTSE was up 1%, with miners including Rio Tinto RIO.L, Glencore GLEN.L and BHP Group BHPB.L providing the biggest boosts, while oil major Royal Dutch Shell RDSa.L rose 2%. [O/R] [MET/L]

The mid-cap FTSE 250 .FTMC also rose 1.7% as data showed China's industrial production climbed a faster-than-expected 3.9% in April as the country returned to work after months of coronavirus-induced lockdowns.

Still, both the indices logged their first weekly fall in three as millions of job losses globally and growing U.S.-China tensions crush consumer demand. U.S. President Donald Trump said on Thursday he had no interest in speaking to his Chinese counterpart right now.

“We’re in a volatile holding pattern here after the very significant bump since March,” said Willem Sels, global chief market strategist at HSBC Global Private Banking.

“We can explain most of that by government and central bank intervention that has almost eliminated the risk of a credit crisis. But we do think that some of the asset price inflation, with price/earnings ratios moving to new highs is exaggerated.”

London stocks have struggled to build on a strong April rally this month as investors face worsening economic indicators and central banks signal a longer-than-expected road to recovery. [MKTS/GLOB]

A survey on Friday showed three-quarters of British manufacturers did not think business will be back to normal within six months, while HSBC further cut global GDP forecasts on fears that easing lockdowns would lead to a second wave of coronavirus infections.

“We just can’t afford the risk of lowering the guards too early, which means we just simply can’t go back to normal anytime soon,” Andrea Cicione, head of strategy at TS Lombard, said.

Cicione said the rebound in stocks from a selloff in March was mostly driven by central bank liquidity and hopes of a V-shaped recovery in earnings.

“But now it’s kind of dawning on investors that firstly, the V-shaped recovery is not guaranteed and secondly, we’ve probably gone too far too quickly.”

A week after investors began betting on negative U.S. interest rates, Bank of England Governor Andrew Bailey said the central bank was not considering taking rates below zero, although he declined to rule it out altogether.

William Hill WMH.L became the latest company to post a plunge in revenue as sports betting volumes collapsed and it was forced to close its retail network of betting shops. But shares rose 8% amid the broader rally.

BT Group Plc BT.L jumped 5.4% as a report said it was in talks to sell a multi-billion pound stake in its wholly owned network subsidiary, Openreach, to infrastructure investors to help fund an ambitious expansion in fibre broadband.

Bus operators Go-Ahead Group GOG.L, Stagecoach Group SGC.L and FirstGroup FGP.L gained between 4% and 9.5% as London's transport operator said it had secured 1.6 billion pounds ($2 billion) in government funding to cover a shortfall in revenue until October.

Reporting by Shreyashi Sanyal, Devik Jain and Sagarika Jaisinghani in Bengaluru; Editing by Bernard Orr, Anil D’Silva and Barbara Lewis