Miners help prop up FTSE
Britain's top equity index has steadied, outperforming the broader European stock market and propped up by commodities shares, which advanced as prices of major industrial metals and oil rose.
The commodity-heavy FTSE 100 index was flat in percentage terms at 6,100.11 points by 0918 GMT (2018 AEDT) on Friday after gaining 0.7 per cent in the previous session. In contrast, the pan-European FTSEurofirst 300 index was down 0.4 per cent.
Equity markets globally retreated after gains on Thursday as investors refocused on underlying weaknesses in the global economy. Most British shares followed suit with the notable exception of the commodity sector.
The UK mining index rose 1.6 per cent, the top sectoral gainer, after metals prices gained following a fall in the US currency, making dollar-priced metals cheaper for holders of other currencies.
Anglo American jumped 5.8 per cent, the top gainer in the blue-chip FTSE 100 index, while Rio Tinto, BHP Billiton and Fresnillo were up 1.2 to 2.2 per cent.
"A squeeze higher in the mining sector ... is preventing a complete sea of red on the FTSE this morning as we see a mild bounce in copper prices," Brenda Kelly, head analyst at London Capital Group, said.
However, she said the sector's gains on Friday were not likely to be sustainable.
"Recent history would indicate that these large swings in the share prices of commodity producers have been characteristic of a downtrend and attempts to catch the falling knife has not been without casualty," Kelly said.
UBS analysts said that the mining sector's outlook remained challenging, with valuations not compelling and free cashflow remaining negative or struggling to cover dividends.
However, it saw value in some selective stocks. For 2016, it preferred miners with low costs and strong balance sheets, including Rio Tinto and Randgold Resources. Over the next two to three years, it liked companies such as Glencore, BHP Billiton and Fresnillo.
Among other sectors, the oil and gas index rose 0.8 per cent, supported by a rise in crude oil prices. BP and Royal Dutch Shell were up 0.9 per cent and 1.3 per cent respectively.
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