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LONDON CLOSE: Week ends on a high as QE and miners give FTSE 100 a boost

Published: 12:39 14 Sep 2012 EDT

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Investors were this afternoon paying thanks to ‘uncle’ Ben Bernanke, whose decision to sanction the latest round of quantitative easing lit a rocket under the mining sector, which in turn helped lift the index of blue-chip UK stocks.

At 5,915.55, the FTSE 100 was up 95.63 points and within spitting distance of the 6,000 level last seen in the early portion of last year.   

The new burst of US easing, alongside efforts by China to boost its economy and an end to steel mill destocking, increases confidence in its 2013 forecasts, heavyweight broker UBS said.

Among the specific metals, copper is well positioned to benefit from QE3 after destocking. Iron ore prices may also recover with seasonal demand towards the end of October, UBS said.

According to mining-focused research house Fairfax, Bernanke has taken decisive action to attempt to end the financial crisis and the move to inject a further $40bn per month should mark an end to the contagion caused by the collapse of value in the mortgage-backed securities market.

“The Fed is moving decisively to end the threat to the US economy and this should stimulate new demand. The US dollar looks like a necessary sacrifice in the short term to restore growth into the economy,” it said.

Iron ore producer Ferrexpo (LON:FXPO) was given a huge shove as it rose 16 per cent to 227.33 pence. Leading the majors was Xstrata (LON:XTA), which rose 7.4 per cent to 1,066pence, while the tiddler of the day in the mining sector was Aquarius Platinum (LON:AQP) which put on a stonking 19 per cent to 48.8 pence a share.

BSkyB was top of the debit column as BT (LON:BTA) threatened the satellite broadcasters hold over sports rights in the UK with its plans to televise top flight rugby.

The small-caps also enjoyed their day in the sun with the FTSE AIM 100 ahead 82.16 points at 3,249.52 – a gain of almost 3 per cent, double the percentage advance of the large caps.

“Although we have, as expected, seen the large risk on trade we now are looking to be defensive on expectations that this will not last,” said Atif Latif of Guardian Stockbrokers. 

“Each QE has had a diminishing effect on market rallies with less upside movement that is sustainable. 

“Although the short term relief rally will push up we remain bearish on the outlook for the market.

“Dividend yields are now the key area for outperformance in this low rate environment or small caps that will allow progressive capital growth fast.”

Junior gold stocks Mariana Resources (LON:MARL, up 30 per cent today at 6.88p), Arian Silver (LON:AGQ, up 10 per cent today at 23.38p), Archipelago (LON:AR, up 8 per cent today at 8.62p) and Cluff Gold (LON:CLF up 5 per cent today at 81.75p) were among the best performers. 

Cluff’s continued momentum was helped this week by a landmark deal with Korean conglomerate Samsung.

Cluff will receive funding for the development of its projects and in return it will supply Samsung with gold, unhedged.


 

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