MARKET COMMENT: Miners Provide Support As London Recovers Losses

LONDON (Alliance News) - London share prices closed higher Tuesday, recovering their losses from Monday, supported by a mining sector boosted by spiking copper prices, but the banking sector once again was the main drag on performance.

"Turnaround Tuesday is back with us, if it ever really went away. The pessimists might say this is the rally’s last hurrah before QE departs the scene (pursued by the requisite bear) but earnings season, despite misses from the likes of IBM and Twitter, has once again been the foundation of equity market gains," said IG analyst Chris Beauchamp.

The FTSE 100 ended the day up 0.6% at 6,402.17. The FTSE 250 also closed up 0.6%, at 15,123.35, and the AIM All-Share up 0.8% at 712.32.

European equity markets posted strong gains as well with the French CAC 40 ending up 0.4%, and the German DAX outperforming to close up 1.9%.

US stocks were trading higher at the London close. The DJIA was up 0.4%, the S&P 500 up 0.5% and the Nasdaq Composite up 1.0%.

Miners performed well after copper prices hit a two-week high overnight amid talk of strike action at significant copper mines. The mining FTSE 350 mining sector closed the day up 1.8%. However, Macquarie Capital analyst Vivienne Lloyd said the strike could have less impact on output than billed.

"The implications of possible production outages attach a bullish undertone to the story for the metal markets, adding to its popularity and resulting in wide dissemination," Lloyd said.

"It is apparent that while strike disruptions in copper have been substantial at times, they are by no means a regular feature of the market in the way that technical outages, slow ramp-ups, and ore grade issues come up year after year," the analyst added.

Anglo American was the best performing blue-chip stock, gaining 3.7%, while Antofagasta, up 3.2%, and Glencore, up 2.2%, also were notable gainers in the FTSE 100.

Standard Chartered was the worst performing stock in London's leading index, falling 8.1%. The Asia-focused bank reported a 16% drop in third-quarter pretax profit, citing higher losses on loans gone bad and increased expenses. The company also expects underlying profit in the second half of the year to be lower than the same period last year, partly due to a higher UK bank levy, regulatory and restructuring costs.

Lloyds Banking Group fell for the second consecutive day, closing down 2.4%. The market showed a negative reaction to the news that the bank put aside another GBP900 million in payment protection insurance mis-selling provisions, which took the shine off third quarter numbers that otherwise showed improving underlying growth. The bank also detailed new strategic plans, under which it will cut 9,000 jobs and close 150 branches net over the next three years.

Energy giant BG Group also spent the day amongst the worst performers in the FTSE 100, falling 1.6% after it reported a drop in its underlying earnings in the third quarter, and said its exploration and production guidance remains at the low end of its forecast range.

Synthomer, meanwhile, was the biggest faller in the FTSE 250, with its shares declining 6.3%. The speciality chemical company warned it expects lower profit in the full year and said earnings could be lower still if economic developments in Europe continue to deteriorate.

The US dollar fell against other major currencies Tuesday, as US durable goods orders unexpectedly showed a notable decrease in September. A Commerce Department report showed that durable goods orders fell by 1.3%, defying expectations for an increase of 0.5%. The reading had plunged by 18.3% in August.

However, the greenback recovered slightly after another data release showed US consumer sentiment rebounded in October after dropping sharply a month earlier. The Conference Board's consumer confidence index rose to 94.5, up from a revised 89 in September. The reading is the highest level the index has reached in seven years, just before the onset of the financial crisis.

At the London equity market close, the pound was quoted at USD1.6155.

The highlight of Wednesday's economic calendar is undoubtedly the monetary policy decision from the US Federal Reserve, after the close of the London stock market at 1800 GMT. The Fed is expected to announce the end of its quantitative easing programme, but the continued strength of the dollar, and comments made from certain Fed members, has raised some hope that it could be delayed.

Domestic news will dominate the morning with several releases from the Bank of England at 0930 GMT.

Wednesday also will be busy on the corporate front, with a number of releases from FTSE 100 companies. Clothes retailer Next will release an interim management statement, miner Antofagasta will provide a third quarter trading report, and financial services firm Standard Life also will issue a trading statement.

By Neil Thakrar; neilthakrar@alliancenews.com

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