By Michael Taylor
LONDON, Jan 29 (Reuters) - Britain's blue-chip FTSE 100
index <> extended earlier gains by midday on Tuesday, led
by banks and miners, as hopes grew of an interest rate cut by
the U.S. Federal Reserve this week.
At 1140 GMT the UK's largest share index edged 88.6 points,
or 1.5 percent, higher at 5,877.5 with trade relatively thin.
The FTSE 100 has now lost 9 percent in 2008.
"It's still very fragile. The sentiment is still very
nervous. There is genuine concern that the banks are still going
to come out with some poor numbers from time to time, and more
write-offs," said Tony Craze, a stockbroker at Dawntraders.co.uk
on UK markets.
"Having said that, there are always opportunities," Craze
said. "Markets overdo it on the upside and the downside and I
think they have on the downside overdone some of these stocks."
Overnight, both U.S. and Asian markets rose after weak
housing data cemented expectations the Fed will slash rates this
week. The Fed will begin a two-day rate-setting policy meeting
later in the day, with a decision due at 1915 GMT on Wednesday.
"There is a degree now of it being a case of how much the
rate cut (will be). I still think it'll be a half (point)... any
less than that would be a disappointment," Craze said.
Sectors boosted by the positive sentiment included banks,
with vague M&A talk also driving shares. HSBC <HSBA.L>, HBOS
<HBOS.L> and Royal Bank of Scotland <RBS.L> all gained between
1.7 and 3.1 percent.
However, Alliance & Leicester <ALLL.L> (A&L) shares slipped
0.6 percent after the bank said it had secured funding to see it
through this year but warned profits would plunge after it
trebled the impact of its losses on complex financial
instruments. See [].
Further on the upside, miners featured as U.S. rate cut
hopes allayed fears of a recession, pushing gold and platinum
prices to historic highs for a third consecutive day and
bolstering copper futures <MCU3=LX>.
Shares in Anglo-Swiss Xstrata <XTA.L> rose 3.8 percent after
controlling shareholders in Brazil's Vale allowed a study of a
possible takeover bid to go ahead.
European mining stocks <.SXPP> rose 3.4 percent as Kazakhmys
<KAZ.L> gained 4.5 percent, Rio Tinto <RIO.L> added 2.4 percent
and Antofagasta <ANTO.L> tacked on 4.5 percent.
Europe's biggest travel firm, TUI Travel <TT.L>, was up 2.6
percent after it hiked forecast cost savings from its tie-up
with First Choice last year and said it was in talks about
merging its TUIfly airline with Lufthansa's <LHAG.DE>
Germanwings. See []
Elsewhere in the sector, Thomas Cook <TCG.L> was 5.6 percent
higher and topped the FTSE 100 leaderboard.
Looking ahead, investors will look to U.S. durable goods
data due at 1330 GMT as well as the U.S. consumer confidence
survey due at 1500 GMT for further economic clues.
RESULTS RAIN IN
Among a host of companies reporting, British life insurer
Prudential <PRU.L> gained 1.4 percent after it reported a 16
percent rise in 2007 sales on Tuesday, boosted by business in
Asia where it said growth would soften in 2008 after a bumper
year. See []
But on the downside, Imperial Tobacco Group <IMT.L> lost 2.4
percent after it said trading was in line with its expectations
in an update ahead of its annual general meeting later on
Tuesday.
Oil major Royal Dutch Shell <RDSa.L> dipped 0.5 percent as
concerns mount that the company had a tougher time in replacing
reserves in 2007 than thought. Shell is due to report on
Thursday.
Shire <SHP.L> fell 2.9 percent after Goldman Sachs cut its
price target but maintained a "buy" rating.
In other news, the British government ordered pay-TV firm
BSkyB <BSY.L> to cut its 17.9 percent stake in broadcaster ITV
<ITV.L> to below 7.5 percent because it hampered competition.
BSkyB gained 1.5 percent, while ITV added 0.3 percent.
(Additional reporting by Dominic Lau and Chloe Fussell, editing
by Elizabeth Fullerton)
