Mining sector gains return London to positive territory

Gains in the mining sector helped the London market pull out of its losing streak yesterday but economic worries continued to shake confidence in financial stocks.

Investor fears over the future for debt-laden countries like Greece and Portugal have kept sentiment in the doldrums in recent sessions and yesterday saw a fresh wave of turbulence in the insurance and banking sectors.

The FTSE 100 Index finished the day up 31.41 points at 5092.33, after suffering steep falls in the session, dropping to just 33 points above the psychologically important 5000 level at one point.

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In the US the Dow Jones Industrial Average was broadly flat.

The rollercoaster session saw the Footsie climb nearly 70 points in morning business, but the optimism faded amid persistent economic worries.

The drop in sentiment, caused by the European debt fears, also hurt the pound as investors cut their exposure to risky assets, including those denominated in sterling.

The pound fell to its lowest level against the dollar since last May, at 1.56 US dollars. It was also down to 1.14 euros, meaning one euro was worth 87p.

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European ministers told their counterparts at a Group of Seven meeting on Saturday they would make sure Greece sticks to its budget-cutting plan.

But analysts said Europe needs to go beyond words to restore confidence among investors worried that problems in Greece, Portugal and other weaker euro zone states could upset or derail the global economic recovery.

"What I think is needed is an agreement on behalf of the EU to provide further support for Greece to further ensure that it doesn't default," said Michael Woolfolk, senior currency analyst at Bank of New York Mellon.

Miners led the gains as the sector's major players get set to report this week. James Hughes, market analyst at CMC Markets, said: "In the short to medium term the mining firms should see a continued strong performance as commodities remain strong.

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"However, more hints of rate hikes and withdrawal of stimulus plans will add more upside to the US dollar and see equities and commodities take a tumble."

Xstrata resumed its momentum late in the session to end the day nearly 4 per cent higher after it reinstated dividends and offered encouragement over commodities demand. Shares added 333/4p to 9833/4p.

Randgold Resources led the Footsie gainers, rising 271p to 4480p after it hiked its dividend by 30 per cent and announced a sharp rise in fourth quarter profits.

But the market jitters meant Aviva lost nearly 3 per cent, or 93/8p to 3553/4p, while Legal & General slipped 25/8p to 71p and Lloyds Banking Group eased 11/8p to 471/4p.

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A poor session for oil and gas stocks also weighed on the Footsie, as oil prices lagged near the two-month lows hit last week of around 71 US dollars a barrel.

BG Group dropped 171/2p to 10941/2p despite Goldman Sachs raising its price target, while prospector Cairn Energy lost 31/4p to 3181/4p.

Inter-dealer broker Icap recouped some of its heavy falls seen at the end of last week following its shock profit warning, adding 93/4p to 3033/4p.

Meanwhile, International Power added 63/4p to 3205/8p after weekend reports suggested a revamped bid for the business from French giant Suez. The two ended talks over a merger in January.

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The biggest Footsie risers were Randgold Resources, Fresnillo ahead 351/2p to 705p, Xstrata, and Icap.

The biggest Footsie fallers were Legal & General, British Airways off 7p to 199p, Aviva, and Prudential off 14p to 5601/2p.

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