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FTSE higher on Chinese demand

Thursday, October 18 09:15:00

Britain's FTSE 100 hit one-month highs today, with mining shares cheered by signs of improvement in the economic outlook in top consumer China. Chinese economic growth slowed to 7.4 percent year-on-year in the third quarter, as expected, but forecast-beating industrial output and retail sales figures for September opened the door for an improvement in the final months of the year. However, gains were capped by the ongoing crisis in the euro zone, where the onus is on Spain to ask for a bailout that would open the way to European Central Bank bond buying. No progress is expected at a summit today.

Steve Larkins, head of sales trading at Seymour Pierce, said the bloc's failure to take the swifter action would continue to weigh on stock market sentiment. But he added that persistent strength in Chinese data, coupled with a recovery in United States - signalled by stronger than expected housing data on Wednesday - were grounds for feeling bullish on equities. "It seems to be that the far east and the U.S. are perking those figures up, it's the Chinese and American markets that are the great engines ... You only need those two turning around and we've suddenly got a reason for buying."

The FTSE 100 was broadly flat at 5,907.79 points by 0739 GMT , after touching a one-month high of 5,907.39 and closing in on September's six month peak of 5,932.62 points. "It feels like everyone wants to try and push it to 6,000 again," said Steve Asfour, head of sales trading at Fox Davies Capital. "We are starting to get more bullish." The latest rises, which have seen the index add 2.0 percent since the start of the week, have come amid solid volumes, adding conviction to the rally. Miners were the biggest boost to the FTSE 100, with the sector adding 0.9 percent.

However, other sectors fared less well, with food producers down 1.4 percent on news of easing sales at Swiss-listed giant Nestle. Diageo fell 1 percent a day after reporting disappointing sales figures which on Thursday were echoed by a slowdown at rival spirits group Remy Cointreau. The energy sector, which traditionally closely tracks developments in China due to its high oil demand, lagged this time, adding just 0.1 percent following a downgrade to Shell by Goldman Sachs. ( C) Reuters