London midday: Markets welcome fiscal cliff deal with two per cent surge

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LONDON (ShareCast) - - US leaders pass budget deal to avert fiscal cliff
- Mining and banking stocks celebrate with decent performance
- UK manufacturing ends 2012 on a high

Mining stocks were registering impressive gains on Wednesday in the aftermath of the US fiscal cliff agreement, which could have plunged the world economy back into recession.

"Immense New Year relief rally for global financial markets following the passage of a bill in the US to avert the full force of the fiscal cliff," said market strategist Ishaq Siddiqi from ETX Capital.

"2013 has kicked off with a bang with bulls in full control of price-action - the risk rally sees all your traditional investments in vogue [stocks EUROSTOXX making 16-month high, euro, commodities, peripheral bond yields, banks, miners et al] while core government bonds and US Treasury's take a beating."

London's blue-chip index, the FTSE 100 (FTSE: ^FTSE - news) , broke through the psychologically-important level of 6,000 in morning trade, rising over 2% on the day. The last time the Footsie closed higher was at the end of April (Paris: FR0004037125 - news) 2011. Nevertheless, the largest technical hurdle will come in towards the 6,100 point level, add analysts at Digital Look.

Despite the above, the fiscal headache is far from over as talks over spending cuts (the so-called sequestration) go on and the US Treasury announced the country has hit its borrowing limit again.

"The fiscal measures are estimated to be worth around $600bn in additional revenue over 10 years. However, the precise nature of spending cuts is yet to be agreed: the bill delays the start of automatic sequestration by an additional two months," Barclays Research adds.

Manufacturing data comes in mixed

UK manufacturing finished 2012 on a positive note after hitting a 15-month high in December. The Markit purchasing manager's index (PMI) rose back above the 50.0 no-change level in December, beating expectations by registering 51.4. Economists had pencilled in a contraction in activity, with a consensus estimate of 49.1.

Commenting on the data economists at Barclays (LSE: BARC.L - news) had this to say: "The PMI survey has been painting a more downbeat picture of the manufacturing sector than official data in recent months and, despite the improvement in December, the gap between the two remains sizeable. (...) We expect manufacturing to experience only a slow recovery this year (0.5% annual growth)."

In contrast, manufacturing figures from the Eurozone weren't so cheery: the Markit PMI for December was revised down to 46.1 from the 46.3 flash estimate. The consensus estimate was for no change.

FTSE 100: Miners surge in London

Riskier assets in the resource sectors were among the best performers in London this morning. Mining peers EVRAZ, Vedanta, Glencore, Rio Tinto (Xetra: 855018 - news) , ENRC, Xstrata (Other OTC: XSRAF - news) and Kazakhmys (LSE: KAZ.L - news) were all making gains of at least 5%.

Meanwhile, banks were also in demand with Barclays the standout performer after Investec (LSE: INVP.L - news) hiked its target price from 260p to 285p and hailed the lender as its "preferred UK domestic bank". Despite an impressive 79% rally over the past five months, the broker said that the shares are still trading "only in line with loss-making RBS (LSE: RBS.L - news) and at a peculiar discount to Lloyds". These latter two banks are rated 'sell' by Investec.

Oil giant BP (LSE: BP.L - news) rose after announcing the "successful start of production" at the Skarv field in the Norwegian Sea, adding new output from one of its core higher-margin areas.

Sector peer Shell (LSE: RDSB.L - news) was subdued on reports that its Kulluk drilling rig has ran aground off the coast of Alaska after being caught in a storm.

Engineering (Milan: ENG.MI - news) support services firm Babcock was higher after saying that it has acquired liquid gas plant unit LGE Process from Weir for £23m.

Just three stocks on the blue-chip index were in the red today as defensive sectors like tobacco and supermarkets bear the brunt of the increase in risk appetite. British American Tobacco (LSE: BATS.L - news) , Morrison and Sainsbury (LSE: SBRY.L - news) were all stuck in the red.


FTSE 100 - Risers
Evraz (EVR) 275.50p +6.41%
Vedanta Resources (LSE: VED.L - news) (VED) 1,230.00p +6.31%
Glencore International (Other OTC: GLCNF - news) (GLEN) 373.00p +6.18%
Rio Tinto (RIO) 3,721.00p +5.97%
Eurasian Natural Resources Corp (LSE: ENRC.L - news) . (ENRC) 300.90p +5.95%
Xstrata (XTA) 1,119.00p +5.67%
Kazakhmys (KAZ) 817.50p +5.08%
Anglo American (LSE: AAL.L - news) (AAL) 1,988.00p +4.96%
Barclays (BARC) 274.70p +4.69%
International Consolidated Airlines Group SA (CDI) (IAG) 193.20p +4.55%

FTSE 100 - Fallers
Morrison (Wm) Supermarkets (MRW) 259.80p -1.22%
Sainsbury (J) (SBRY) 341.40p -1.07%
British American Tobacco (BATS) 3,100.00p -0.67%
Royal Dutch Shell 'A' (RDSA) 2,126.50p +0.21%
Royal Dutch Shell 'B' (RDSB) 2,184.00p +0.41%
Smith & Nephew (LSE: SN.L - news) (SN.) 683.50p +0.59%
Reckitt Benckiser Group (RB.) 3,912.00p +0.85%
Imperial Tobacco Group (IMT) 2,396.00p +0.97%
AstraZeneca (LSE: AZN.L - news) (AZN) 2,938.00p +0.98%
Bunzl (BNZL) 1,019.00p +0.99%

FTSE 250 (FTSE: ^FTMC - news) - Risers
Ferrexpo (FXPO) 270.10p +7.52%
Kenmare Resources (LSE: KMR.L - news) (KMR) 33.10p +6.43%
Heritage Oil (Other OTC: HGOCF - news) (HOIL) 199.90p +5.43%
Bank of Georgia Holdings (BGEO) 1,081.00p +4.95%
African Barrick Gold (LSE: ABG.L - news) (ABG) 462.20p +4.90%
Jupiter Fund Management (JUP) 291.90p +4.81%
Bodycote (BOY) 474.50p +4.77%
Ophir Energy (Other OTC: OPGYF - news) (OPHR) 528.50p +4.76%
Chemring Group (LSE: CHG.L - news) (CHG) 240.00p +4.53%
Fenner (FENR) 414.00p +4.47%

FTSE 250 - Fallers
New World Resources A Shares (NWR) 324.60p -3.77%
Enterprise Inns (LSE: ETI.L - news) (ETI) 99.85p -2.68%
Supergroup (SES: E1:S10.SI - news) (SGP) 550.00p -1.96%
Computacenter (CCC) 415.00p -1.66%
Ocado Group (Other OTC: OCDGF - news) (OCDO) 85.30p -1.56%
KCOM Group (LSE: KCOM.L - news) (KCOM) 72.00p -1.44%
Telecom Plus (TEP) 912.50p -1.30%
Direct Line Insurance Group (DLG) 214.00p -1.11%
WH Smith (LSE: SMWH.L - news) (SMWH) 663.00p -1.04%
Grainger (GRI) 117.50p -0.93%

FTSE TechMARK - Risers
Vislink (VLK) 26.50p +4.95%
Torotrak (TRK) 27.75p +4.72%
Optos (OPTS) 172.00p +1.33%
Wolfson Microelectronics (LSE: WLF.L - news) (WLF) 199.75p +1.27%
Consort Medical (LSE: CSRT.L - news) (CSRT) 779.50p +0.97%
Sepura (SEPU) 95.25p +0.79%
Skyepharma (SKP) 72.00p +0.70%
Vectura Group (LSE: VEC.L - news) (VEC) 84.50p +0.60%
NCC Group (LSE: NCC.L - news) (NCC (BSE: NCC.BO - news) ) 153.50p +0.49%
Microgen (MCGN) 122.00p +0.41%

FTSE TechMARK - Fallers
RM (RM (LSE: RM.L - news) .) 74.50p -5.70%
Filtronic (FTC) 33.00p -5.04%
Promethean World (LSE: PRW.L - news) (PRW) 16.00p -3.76%
BATM Advanced Communications Ltd (Other OTC: BTAVF - news) . (BVC) 16.50p -1.49%
E2V Technologies (LSE: E2V.L - news) (E2V) 121.25p -1.22%
Innovation Group (LSE: TIG.L - news) (TIG) 23.75p -1.04%
Kofax (KFX) 293.75p -0.76%
Triad Group (LSE: TRD.L - news) (TRD) 6.75p 0.00%
Parity Group (LSE: PTY.L - news) (PTY) 18.50p 0.00%
Antisoma (ASM) 1.85p 0.00%