Footsie rises as BHP Billiton and Rio Tinto advance on strong metal prices

FTSE:5,394.53 (+125.87) Mid-250:10,525.93 (+282.78) Small Cap:3,022.22 (+71.08)

UK STOCKS advanced for a second day yesterday, after the Federal Reserve said some policy makers wanted to add to stimulus measures and factory orders topped forecasts in the US.

The FTSE 100 Index gained 125.87, or 2.4 per cent, to 5,394.53 at the close in London. The gauge has slumped 7.2 per cent in August, its biggest monthly drop since February 2009, as concern that the global economic recovery is faltering wiped more than $400 billion off the value of UK shares.

Fed policy makers debated ways to invigorate the recovery and hiring at their meeting earlier this month, according to minutes released after European markets closed yesterday. That potentially lays the groundwork for action, such as a third round of asset purchases, also known as QE3, at the Federal Open Market Committee’s September meeting.

Some members of the committee favoured a “more substantial move” at the August 9th meeting beyond the pledge adopted by the panel to hold interest rates at record lows for the next two years.

“It’s a buying opportunity,” said Virginie Maisonneuve, head of global equities at Schroder Investment Management.

“If needed, we’ll have a QE3 or something of that sort in the US to help extend this period of fragility so that we don’t go back into a recession. I don’t think it’s a recession at this point,” he said.

BHP Billiton and Rio Tinto rose 3.1 per cent to 2,106p and 3.5 per cent to 3,802p, respectively, as aluminium, copper, nickel, tin and zinc all advanced on the London Metal Exchange.

The FTSE 350 Mining Index fell 9.9 per cent in August.

“A lot of materials stocks and industrial stocks have been beaten down in the last few weeks on really what is a crisis of confidence. It’s very wise to buy on the dip because those are really cheap stocks,” Ms Maisonneuve said.

Smith Nephew rose 4.9 per cent to 625.5p for the biggest gain in more than seven months.

Bwin.Party Digital soared 14 per cent to 125.3p after reporting first-half earnings before interest, taxes, depreciation and amortisation that beat analysts’ estimates.

Tesco advanced 3.8 per cent to 378.6p. Britain’s largest retailer plans to sell its 129-store Japanese unit because it cannot build a “sufficiently scalable business” in the country. – (Bloomberg)