By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Miners helped lift the U.K.'s benchmark
stock index to a second day of gains on Tuesday, after slowing
inflation in China fueled expectations of continued monetary
stimulus to support economic growth.
The FTSE 100 index rose 0.6% to close at 6,313.21, adding to a
0.4% gain on Monday.
Mining firms climbed to the top of the index, after official
Chinese data showed March consumer prices rose 2.1%, coming in
below expectations and marking a fall from the 3.2% inflation
recorded in February.
The slowdown eased pressure on the People's Bank of China to
tightening monetary policy, boosting expectations of a continuation
of stimulus to spur growth. Miners tend to rise on growth
expectations from China, because the country is a major user of
natural resources.
Shares of Vedanta Resources PLC jumped 5.3%, Eurasian Natural
Resources Corp. gained 5.1% and Anglo American PLC rose 3.3%.
Heavyweights Rio Tinto PLC (RIO) and BHP Billiton PLC (BHP) gained
4.8% and 3.5%, respectively. Metals prices were higher across the
board.
Analysts at UBS said in a note that worries over potential China
tightening, along with concerns over euro-zone troubles and fears
the U.S. Federal Reserve could end its asset purchases, have led
miners to underperform the broader U.K. market in 2013. But this
weakness sets up a buying opportunity, they said, and pointed to
Glencore International PLC (GLCNF), up 4.6%, and Rio Tinto as
preferred stocks.
In the U.S., aluminum maker Alcoa Inc. (AA) reported earnings
ahead of expectations late Monday, further fueling a positive
sentiment on Tuesday. Alcoa is considered a bellwether for global
demand and the unofficial kickoff for the earnings season.
On the data front in the U.K. on Tuesday, the Office for
National Statistics said manufacturing output rose 0.8% and
industrial production picked up 1% on the month in February,
reducing fears of a triple-dip recession.
"Today's estimates of industrial output help to reassure us that
the amount of manufacturing drag is likely to be fairly limited, or
even avoided, further raising confidence in our view that a
'triple-dip' recession will be avoided," Victoria Clarke, economist
at Investec Securities, said in a note.
Among other notable movers in London, shares of John Wood Group
PLC gained 0.5%, after the oil-services firm said it secured a $150
million extension to a North Sea pact.
Banks were also rising, with shares of Barclays PLC (BCS) up
3.2%, and Lloyds Banking Group PLC (LYG) rising 1.9%. Royal Bank of
Scotland Group PLC (RBS) rose 2.9%, shaking off news that the
Financial Conduct Authority has started a probe into system
failures at the bank last year that prevented some customers to
access cash and make payments.
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