A rebound in miners and banks helped the FTSE claw back some of yesterday's sharp losses this morning.
By 10.30am, the blue-chip FTSE 100 Index was trading 22.66 points (+0.43) above its previous close at 5290.36, while the broader FTSE 250 traded at 9233.29, representing a 3.61 -point drop (-0.04%).
'The FTSE is likely to hit 5500 fairly shortly and once it gets past that level there's every chance it is going to get to 6000. If the western markets are going to falter the trigger will be from the east (China tightening fiscal policy),' said Wood-Smith of Williams de Broe.
Miners dominated the FTSE 100 leader board once again, as yesterday's dip provided investors with an opportunity to re-enter the sector. The sector's ascent was aided by a drop in the US dollar, which fuelled a rebound in underlying commodity prices.
Silver miner Fresnillo has been the best performing stock on the FTSE so far, up 3.5% to 902p followed by platinum producer Lonmin, which traded 2.7% higher at 1731p. Copper miner Kazakhmys added 2.3% to 1302p, while gold producer Randgold Resources gained 1.7% to 4971p, after December gold futures edged marginally higher to $1142.1 per troy ounce.
Randgold also announced that it has completed a previously announced sale of its Kiaka project license to Volta Resources in exchange for $4,000,000 Canadian dollars in cash and 20,000,000 common shares in Volta.
Energy majors were also in demand this morning, with the likes of Royal Dutch Shell, BP, and Cairn Energy up between 1.2% and 1.3% to 1868.5p, 588.7p and 2951p respectively. BG Group was by far the sector's best performing equity, up 2.3% to 1157p following an upbeat report from UBS. The broker also raised BG's price target from 1060p to 1120p today.
The improvement in risk appetite helped banks recover higher as well, with Barclays 2.1% higher at 314.8p, Standard Chartered up 2% to 1657p and HSBC 1.3% above yesterday's close at 742.4p.
Elsewhere, beverage giant SABMiller continued to add to yesterday's gains, rising 0.82% to 1728p after several brokers upgraded the company's price targets. Telecoms firm Cable and Wireless (C&W) also benefitted from a broker upgrade today. Its shares climbed 1.8% to 138p after JPMorgan upped the company's rating from 'neutral' to 'overweight', saying C&W's 'exposure to cyclical recovery should be well above average.'
In contrast, shares of Thomas Cook plunged 4.4% to 208.8p after Morgan Stanley downgraded the travel group's shares from 'equal-weight' to 'underweight', and said that its operating environment is still weak and that it needs to refinance its debt sooner than the market expects. Morgan Stanley cut its price target on the company from 270p to 230p. Morgan Stanley also lowered its recommendation on rival Tui Travel from 'overweight' to 'equal-weight' and cut its price target from 320p to 290p. Tui's shares retreated 2.7% to 248.2p.
Looking ahead, US futures were beginning to tick lower during the mid-morning trading session, suggesting that Wall Street may be gearing up for a negative start this afternoon. Sentiment appears to be turning and, as things stand, it wouldn't be a surprise to see the FTSE relinquishing all of its morning gains by this afternoon.
