Reuters: Hot Stocks: Chinese data boosts UK mining index to two-month high

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Chinese data boosts UK mining index to two-month high Aug 9th 2013, 15:24 Fri Aug 9, 2013 11:24am EDT * Blue-chip FTSE 100 index rises 0.9 percent * UK mining index up 4.9 pct, hits 2-month high * Mining index gains 20 pct in 1 mth, up for 5th week By Atul Prakash LONDON, Aug 9 (Reuters) - UK-listed mining shares rose to a two-month high on Friday after strong factory output data from China, the world's largest metals consumer, boosted the demand outlook for raw materials. "Chinese data acted as a catalyst to mining equities, which have scope to trade a lot higher from where they are now," said Daniel Harris, director and head of dealing at H2O Markets. "Since miners have such a strong weight on the FTSE index, if they do flourish, then you should see equity markets trading much higher in the coming weeks." Sentiment also improved after robust UK economic data, as Britain's construction output grew more than expected, house prices in England and Wales reached an all-time peak and the trade deficit in goods narrowed, reviving expectations of a broader economic recovery. The UK mining index, which includes heavyweights such as Rio Tinto and BHP Billiton, climbed 4.9 percent after China's factory output grew in July at its fastest pace since the start of the year. Yet the upbeat tone contrasts with recent earnings from the sector. Rio for instance said this week underlying earnings for the group fell 18 percent to $4.23 billion in the first six months of the year, dragged down by weaker prices, particularly of iron ore. Shares in Rio - which according to Morgan Stanley research makes around 46 percent of its revenue in China - were up nearly 5 percent at 3,164 pence by 1510 GMT, having hit a four-month high, but remain well shy of their record 5,920 set in mid 2008. China's factory data, which followed recent forecast-beating trade numbers, raised expectations the world's second-biggest economy was coming back on track after more than two years of slumping growth and that metals prices could recover. Prices of copper, aluminium, nickel and zinc rose 1.1 to 3.7 percent. The UK mining index, which has surged nearly 20 percent in a month, was on track to gain for a fifth straight week. "The mining sector is one cyclical that has been left behind in the last 12 months on disappointing China data," Robert Parkes, equity strategist at HSBC, said. "The reaction that we have seen to some recent encouraging numbers ... highlights that investors may have got too pessimistic on China and as a result a little bit of good news here is going a long way," Parkes said. "We expect that we will not see a hard landing in China. We see the economy stabilising in the second half of this year." Stronger miners helped the broader stock index to gain for a second straight session, with the blue-chip FTSE 100 index gaining 60.12 points, or 0.9 percent, to 6,589.80 points by 1433 GMT. It is up about 12 percent so far this year. (Editing by David Holmes) Link this Share this Digg this Email Reprints

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