Financial and mining stocks lead rally as Footsie hits two-month high

FTSE: 5,441.80 (+46.10) Mid-250: 10,320.00 (+164.20) Small Cap: 2,821.14 (+20.11)UK STOCKS climbed to their highest level in more than two months yesterday, led by a rally in financial and mining companies, amid growing optimism that euro- area policy makers will contain the region's debt crisis.

The benchmark FTSE 100 Index gained 0.9 per cent in London, its highest level since August 3rd. The gauge earlier fell as much as 0.9 per cent.

“The bias in the market does appear to be on the upside,” said Yusuf Heusen, a sales trader at IG Index in London.

“With sentiment turning positive for now – and evidence that there’s an awful lot of uninvested cash out there – further gains may follow,” he said.

Slovakia, the only country that has not ratified a revised bailout fund, will hold a second vote on October 14th at the latest after failing to approve the European Financial Stability Facility yesterday.

Barclays led banks higher, rallying 6.4 per cent to 187p, while Royal Bank of Scotland advanced 2 per cent to 25.81p.

Insurers Aviva and Prudential rose 5.6 per cent to 343.5p and 3.7 per cent to 636.5p, respectively.

Antofagasta paced mining shares higher, jumping 6.9 per cent to 1,151p as copper gained in London.

Kazakhmys climbed 5.5 per cent to 932p and Vedanta Resources rose 4.1 per cent to 1,263p.

Copper rose as shrinking Asian inventories of the metal signalled steady demand from the region, including China, the world’s largest consumer of the metal.

Randgold Resources jumped 2.9 per cent to 6,595p as gold advanced in London.

The shares also climbed after rival Fresnillo raised its gold-output forecast. Fresnillo’s shares still dropped, falling 2 per cent to 1,665p after the world’s largest primary silver miner lowered its full-year output target.

Burberry climbed 3.5 per cent to 1,308p. The UK’s largest luxury-goods maker reported fiscal second-quarter sales that beat analysts’ estimates.

Man, the world’s largest hedge fund manager, tumbled 6 per cent to 156.3p after the net asset value of its flagship AHL Diversified fund fell 5.5 per cent in the week through October 10th.

Premier Foods tumbled 20 per cent to 3.78p as analysts at Exane BNP Paribas cut their price estimate for the shares. – (Bloomberg)