Mining stocks climb while banks slide ahead of euro zone debt meeting

FTSE:5,350.58 (+30.55) Mid-250:10,531.80 (+99.75) Small Cap:3,020.51 (+30.62)

A RALLY by commodity issues on a brighter demand picture pulled Britain’s top share index higher yesterday, although weakness in banks dented some sentiment as investors looked cautiously ahead towards a key meeting today on the euro zone debt crisis.

French president Nicolas Sarkozy is to meet German chancellor Angela Merkel to discuss further steps to alleviate the crisis, although one mooted remedy, the creation of common euro area bonds, is not on the agenda.

“If there can be an agreement allowing greater fiscal co-ordination, the market should take this as a positive,” said Atif Latif, director of Trading Equities and Derivatives at Guardian Stockbrokers. “The market needs some clarity for investor confidence.”

The FTSE 100 closed up 30.55 points, or 0.6 per cent, extending its rally into a third straight session.

Market movements were calmer than last week’s swings, when the UK blue-chip index swung in a range of more than 500 points over five trading sessions.

Strength in energy and mining stocks provided the main prop for the blue chip gains, helped by data yesterday showing Japan’s economy shrank much less than expected in the second quarter.

Among the speciality miners boosted by firmer metal prices, Kazakhmys and Lonmin were two of the best performers, up 3.5 per cent and 2.9 per cent.

Precious metals miner Fresnillo was also a top FTSE 100 gainer, up 4.1 per cent.

Barclays was the biggest banking faller, down 2.1 per cent and affected by press reports saying the Independent Commission on Banking is to impose tougher-than-expected “ring-fencing” of retail and investment banking activities when it presents its report in September.

BP led the rally by integrated oils, up 2.9 per cent. BP and GDF Suez , a French utility, have separately put their interests in two gas fields in the North Sea on the block as the sell-off of mature assets in the region gathers pace, the Financial Times said.

Elsewhere with the blue chip risers, insurer Standard Life took on 2.1 per cent. Insurance consolidator Resolution firmed 3.1 per cent ahead of its first-half results due today.

Accounting software firm Sage was the top FTSE 100 faller, down 2.1 per cent as Goldman Sachs downgraded its rating. – (Reuters)