By Aude Lagorce
LONDON (MarketWatch) -- British shares gained on Monday, led by
the mining sector, as strong manufacturing data from the U.S. and
China buoyed sentiment.
The FTSE 100 index rose 0.3% to end at 5,694.62.
The index fluctuated between gains and losses throughout the
morning but turned higher in early afternoon with the release of
better-than-expected U.S. manufacturing data.
The surprise improvement fueled investors' confidence in the
strength of the global economic recovery and helped mining shares
extend a rally started with the publication of solid Chinese
manufacturing data overnight.
Shares of Xstrata PLC gained 3.7% and Kazakhmys PLC added
1.8%.
The strong U.S. data also helped U.K. investors shrug off their
disappointment that quantitative easing likely won't happen in the
U.K. in the near future as economic indicators improve.
"The market opened very strongly on the back of the Chinese data
but quickly pulled back after better-than-expected U.K. PMI, which
is the final nail in the coffin for more quantitative easing on
this side of the Atlantic," said Richard Perry, strategist at
Central Markets.
The Bank of England holds its policy meeting on Thursday.
Better-than-expected economic data will fuel the case for not
pumping any more money into the economy at this stage.
"Every bit of good U.K. economic news is bad news as it makes
another round of quantitative easing unlikely," Perry said.
While the Bank of England decision on Thursday is important to
investors, it ranks second to what the U.S. Federal Reserve does on
Wednesday. It is widely expected to launch a new bond-purchase
program.
There was a pocket of strength in the financial sector, with
shares of Royal Bank of Scotland Group PLC (RBS) rising 2.2% and
Lloyds Banking Group PLC climbing 1%.
Shares of recruitment companies Hays PLC and Michael Page
International PLC clocked gains of 3% and 4% respectively after
Credit Suisse upgraded its recommendation on both stocks to
outperform, citing their exposure to international markets.
Shares of chip maker CSR PLC rose 2% on the back of an upgrade
from Morgan Stanley. The broker lifted its rating on the stock to
equal-weight, saying many of the negative issues the company faces
are already discounted in the share price including market-share
loss in the wireless segment.
One of the main decliners on Monday was Serco Group PLC . Shares
of the outsourcing company fell 4.4% after it abandoned plans to
pass on the impact of government spending cuts to suppliers.
Outside the main index this time, shares of Ryanair Holdings PLC
(RYAAY), declined 3.7%. Europe's largest low-cost airline reported
a 32% increase in second-quarter profit and lifted its guidance for
the year but cautioned it has little visibility on ticket prices in
the fourth quarter.