LONDON MARKET OPEN: China-Exposed Stocks Lead Early Gains

LONDON (Alliance News) - Shares in London opened higher, with miners and other stocks with exposure to China leading the gainers, following a weak set of economic data from China that nevertheless was seen as better than feared by analysts.

The FTSE 100 index was up 1.8% at 5,882.17 points, the FTSE 250 up 1.1% at 16,133.36 and the AIM All-Share up 0.3% at 689.84. In Europe, the French CAC 40 was up 2.3% while the German DAX 30 up 2.4%.

The top four winners in the FTSE 100 shortly after the open were miners, with Anglo American up 7.6%, Glencore up 6.0%, Antofagasta up 5.2% and BHP Billiton up 5.1%.

Other stocks with exposure to China also gained, with Burberry up 3.1% and Aberdeen Asset Management up 3.0%, while in the FTSE 250, Fidelity China Special Situations was up 3.2%.

"On this occasion, I think the markets may have been relieved that the numbers were not as bad as they could have been, given the challenges facing the economy during this period of transition and slowing global growth," said Oanda senior market analyst Craig Erlam.

The Chinese economy expanded in 2015 at the slowest pace in 25 years as the nation strives to shift its focus to domestic consumption and away from exports. Economic growth eased to 6.9% in 2015, the least since 1990, from 7.3% in the previous year, data published by the National Bureau of Statistics showed. It also was slower than the government's full-year target of about 7.0%.

In the fourth quarter, gross domestic product grew 6.8% year-over-year, while economists expected the growth rate to remain unchanged at 6.9%. This was the weakest growth since 2009. On a quarterly basis, GDP advanced 1.6% in the three month-period to December, but slower than previous quarter's 1.8% rise. The sequential growth was expected to remain steady at 1.8%.

Meanwhile, China's industrial production grew at the weaker pace of 5.9% year-over-year in December following November's 6.2% rise. The expected rate of increase was 6.0%. Likewise, Chinese retail sales climbed 11.1% in December, slightly weaker than prior month's 11.2% increase and the 11.3% rise expected by economists.

"This morning's latest Chinese economic data hasn't really shed any new light on an economy that we know is slowing down," said CMC Markets chief market analyst Michael Hewson. "While these numbers are slightly disappointing they don't point to a sharp slowdown. However it does raise the question as to what further steps to stimulate the economy policymakers will take in the coming weeks."

The Chinese Shanghai Composite index closed up 3.2% on the data, the Japanese Nikkei 225 up 0.6% and the Hang Seng index in Hong Kong up 2.0%.

Shares in Rio Tinto were up 4.2%. The Anglo-Australian miner reported its fourth-quarter global iron ore production was 87.2 million tonnes, up 10% from the year-ago quarter. Global iron ore shipments for the quarter improved 11% to 91.3 million tonnes.

"We will continue to focus on disciplined management of costs and capital to maximise cash flow generation throughout 2016," Rio Tinto Chief Executive Sam Walsh said.

Global iron ore production in 2016 is expected to be around 350 million tonnes. Rio Tinto's expected share of production of bauxite, alumina and aluminium is 45 million tonnes, 7.8 million tonnes and 3.6 million tonnes, respectively.

In 2016, Rio Tinto expects its share of mined copper production to increase to between 575 and 625 thousand tonnes, with higher production at Kennecott, and including an expected share of joint venture production at Grasberg. Refined copper production is expected to be between 220 and 250 thousand tonnes.

Prudential was up 3.1%. The insurer sought to demonstrate the strength of its capital position under new rules governing insurers across the European Union, as new Chief Executive Mike Wells put middle classes across Asia, Europe and the US at the heart of the group's strategy.

Prudential provided the update ahead of an investor conference set to be held Tuesday. The conference has been seen as an opportunity for Wells to reassure the market about the sustainability of growth in areas such as Hong Kong, in what is the chief executive's first major interaction with the market since succeeding Tidjane Thiam last summer.

Unilever reported a fall in profit in 2015 but growth in revenue as it warned of volatile times ahead. The food, home and personal care product supplier said pretax profit in 2015 fell 6% to EUR7.22 billion from EUR7.64 billion in 2014, although revenue grew 10% to EUR53.27 billion from EUR48.43 billion.

Underlying sales grew 4.1%, ahead of its 2% to 4% guided growth range. The company said that consumer demand remained fragile, while currency devaluation also harmed results, but that it achieved volume growth. Unilever will pay a quarterly dividend of EUR0.302 for its fourth quarter.

Shares in Unilever were up 1.4%.

Oil-related stocks also were higher as oil prices recovered from the lows seen on Monday. Royal Dutch Shell 'A' shares were up 2.8%, BP up 2.6% and BG Group 2.4%. Mid-caps Cairn Energy and Tullow Oil were up 5.5% and 4.7%, respectively.

North Sea benchmark Brent crude was quoted at USD29.37 a barrel Tuesday after the equities open, having recovered some ground overnight from the low of USD27.69 a barrel touched on Monday, a level it hasn't seen since November 2003. Meanwhile, US benchmark West Texas Intermediate was standing at USD29.72 a barrel, up from its Monday low of USD28.35 a barrel.

The International Energy Agency is expected to release its official Oil Market Report later in the day.

"Yesterday's monthly OPEC report pointed to 2016 as heralding the start of the rebalancing between supply and demand. With the IEA having historically been more bullish about prospects for an early rebalancing, today's report could help limit the downside potential in crude oil prices," said Lloyds Bank.

In the FTSE 250, Ocado Group sahres were up 11%, after the Daily Mail reported that US online retailer Amazon is considering buying the UK-listed company.

SIG was down 1.1% after the building products distributor was downgraded to Sell from Neutral by UBS.

The New York market will reopen Tuesday following the Martin Luther King's Birthday holiday.

In the economic calendar, UK consumer, retail and producer price indices are due at 0930 GMT. The EU consumer price index follows at 1000 GMT. Bank of England Governor Mark Carney speaks at Queen Mary University in London at 1200 GMT. Also Tuesday, the International Monetary Fund will release its World Economic Outlook.

By Daniel Ruiz; danielruiz@alliancenews.com

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