Reuters: Hot Stocks: UPDATE 1-Britain's stocks rally, mid-caps close at record high

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UPDATE 1-Britain's stocks rally, mid-caps close at record high Aug 1st 2013, 16:03 Thu Aug 1, 2013 12:03pm EDT * FTSE 100 up 0.9, FTSE 250 at fresh record highs * Financials, miners lead the gains * Mid-cap P/E valuations 14 percent above 10-year average (Updates with final closing prices for FTSE 250) By Toni Vorobyova LONDON, Aug 1 (Reuters) - Britain's equity markets rose on Thursday, led by financials and mining stocks, with the mid-cap FTSE 250 index closing above the psychologically key 15,000 points mark for the first time in its two-decade history. Financials, the biggest sector among Britain's mid- and large-caps, rallied thanks to forecast-beating results at Britain's largest retail bank Lloyds, up 8 percent, and fund manager Jupiter, up 11 percent. Miners, meanwhile, benefited after official manufacturing activity data out of top metals consumer China came in better than expected. The broad equities-friendly backdrop was reinforced by the European Central Bank reiterating plans to keep rates low for an "extended period". Comments from the U.S. Federal Reserve overnight had already dampened expectations of its stimulus being scaled back as soon as September. "The economic data has been good, the comments from the Fed meetings were OK, even the PMI from China was positive, so there is very little resistance (for equities)," said Zeg Choudhry, head of equities trading at Northland Capital Partners. A rally on Wall Street, where the S&P 500 topped the 1,700 level for the first time, further boosted sentiment. That helped the blue-chip FTSE 100 recover from some disappointment at the lack of action or comments by the Bank of England, to finish up 60.92 points or 0.9 percent at 6,681.98. The FTSE 250 rose 1.3 percent to a record closing high of 15,061.21 and continuing its year-to-date outperformance over its bigger peer. Mid-cap companies generate around half of their sales in Britain, compared to less than a quarter for the blue-chips, putting them in a better position to benefit from the improving domestic economy. In fresh proof of that recovery, Britain's manufacturing sector grew at its fastest rate in well over two years in June, according to Thursday's PMI release. Its strong gains have pushed the FTSE 250 into increasingly expensive territory when compared with 12-month earnings expectations, with the index trading 14 percent above its 10-year average on that ratio, according to Datastream. The FTSE 100, in contrast, is still slightly below its historical valuations. "The price/earnings ratios are getting quite extended in certain well-regarded (mid-cap) companies so there is always scope for disappointment," said Paul Kavanagh, chairman of Killik Capital. "There is greater individual stock risk but at the moment there is still money looking for growth and looking for secure growth so I expect the market will continue to trend higher." (Editing by Catherine Evans) Link this Share this Digg this Email Reprints

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