London Markets: FTSE 100 gains as resources, banks rise

By Sara Sjolin

LONDON (MarketWatch) ? British stocks rose on Tuesday as gains for the mining and banking sectors lifted the market after trade data from China suggested continued solid Chinese demand.

The FTSE 100 /quotes/zigman/3173262 UK:UKX +1.50% , Britain?s benchmark stock index, climbed 1.5% to 5,697, reversing a 0.7% loss on Monday.

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Mining shares posted strong gains, with Kazakhmys PLC /quotes/zigman/391399 UK:KAZ +5.03% ?jumping 5.1%, Antofagasta PLC /quotes/zigman/139152 UK:ANTO +5.02% ?rising 5.1%, and Vedanta Resources PLC /quotes/zigman/336962 UK:VED +6.05% ?climbing 6.2%.

Mining stocks tend to rise on positive data from China, because the nation is a big consumer of commodities. Detailed imports data showed Tuesday that Chinese demand growth for many commodities has picked up, according to Barclays Capital. Copper imports rose 47.7% year-on-year in December compared to 28.6% in November, while aluminum imports increased 25.1% versus 3.1% in November.

?There is a growing acceptance that China might be able to do a soft landing rather than a hard landing, as previously feared,? said Richard Hunter, head of U.K. equities at Hargreaves Lansdown PLC.

Gold futures also gained Tuesday, which further lent support to the mining sector.

Financials and banks also pushed the British stock market north with Lloyds Banking Group PLC /quotes/zigman/255656/quotes/nls/lyg LYG -3.07% ? /quotes/zigman/126322 UK:LLOY +3.78% ?rising 3.8%, Barclays PLC /quotes/zigman/152323/quotes/nls/bcs BCS -2.53% ? /quotes/zigman/301787 UK:BARC +5.73% ?climbing 6% and Royal Bank of Scotland Group PLC /quotes/zigman/530544/quotes/nls/rbs RBS -0.64% ? /quotes/zigman/155978 UK:RBS +4.91% ?moving up 4.5%.

?The banks benefit from an improved global economy and more promising signals from U.S. economic data,? said Hunter.

However, bank stocks are more volatile than the broader market and tend to post strong gains in market rallies, but big losses when sentiment is negative, according to Hunter. Tuesday?s gains in the banking sector are therefore unlikely to continue and can quickly be converted into losses.

?Overall, the European situation has to be resolved, before we can make sustainable progress. I will not be surprised if we see these gains being reversed,? Hunter said.

In the energy sector, Cairn Energy PLC /quotes/zigman/576745 UK:CNE +3.09% ?posted a 3% gain, after the company said it will pay shareholders $3.5 billion in cash. Shareholders will receive ?1.60 ($2.47) for each existing ordinary share.

Retailer Marks & Spencer Group PLC /quotes/zigman/298234 UK:MKS +3.05% ?rose 3% on positive Christmas sales data. Group sales were up 2.4% excluding valued-added tax for the 13 weeks leading up to Dec. 31, with food and clothing performing the strongest. The retailer also reiterated its full-year profit view, but said it expects conditions to remain challenging.

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Source: http://feeds.marketwatch.com/~r/marketwatch/financial/~3/fsEFA9RCnpQ/story.asp

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