* Miners rebound as metal prices stabilise
* Energy stocks rally with crude prices
* UK May manufacturing output shrinks unexpectedly
By Jon Hopkins
LONDON, July 7 (Reuters) - Britain's leading share index was
up 1.1 percent by midday on Tuesday with gains from miners, oils
and banks offseting some weakness in defensive stocks as
investors brushed off disappointing UK industrial output data.
By 1128 GMT the FTSE 100 <> was up 39.62 points at
4,234.53, after falling 1 percent to a two-month low on Monday.
The index has gained 21.3 percent since hitting a six-year
low in March but is still down 5.3 percent for the year.
"It is a reversal of fortune that is lifting the FTSE up
today, with a bounce back by the mining sector helping to lift
sentiment across the market," said Philip Gillet, a sales trader
at spread better IG Index.
Miners added the most points to the blue-chip index,
reversing Monday's losses against a backdrop of stabilising
metals prices.
Kazakhmys <KAZ.L>, Vedanta Resources <VED.L>. Lonmin
<LMI.L>, Rio Tinto <RIO.L>, Antofagasta <ANTO.L>, Anglo American
<AAL.L> and BHP Billiton <BLT.L> added 3.8-6.2 percent.
Oil shares also rallied as crude prices <Clc1> recovered
slightly from recent falls, with BP <BP.L>, BG Group <BG.L>,
Royal Dutch Shell <RDSa.L>, Cairn Energy <CNE.L> and Tullow Oil
<TLW.L> up 0.8 to 3.4 percent.
And banks rebounded from early falls, extending Monday's
rally with Royal Bank of Scotland <RBS.L>, Barclays <BARC.L>,
HSBC <HSBA.L> and Standard Chartered <STAN.L> adding 1.2-2.0
percent.
DEFENSIVES MIXED
Some defensive issues were also in demand as investors,
still cautious after last week's disappointing non-farm payroll
figures, switched into stocks perceived as resilient to economic
weakness.
Drugmakers AstraZeneca <AZN.L> and Shire <SHP.L> found
support, up 0.5 percent and 1.4 percent respectively.
Shire said on late on Monday that it has filed a treatment
protocol for its Velaglucerase Alfa drug for Gaucher disease and
is working with the U.S. Food & Drug Administration to file a
new drug application for the treatment as early as possible.
[]
Food retailers Tesco <TSCO.L> and Wm Morrison <MRW.L> put
on 0.6 and 2 percent respectively.
Wm Morrison was supported by an upgrade in rating to "buy"
from "neutral" by Bank of America-Merrill Lynch.
But food producers were weak, with AB Foods <ABF.L> the top
blue chip faller, down 1.7 percent and Cadbury <CBRY.L> off 0.6
percent.
British American Tobacco <BATS.L> and Imperial Tobacco
<IMT.L> shed 1 and 0.3 percent respectively and mobile telecoms
heavyweight Vodafone <VOD.L> fell 0.8 percent as the benefits of
other defensive stocks faded.
British manufacturing output unexpectedly shrank in May,
official data showed on Tuesday, making it less likely the
economy returned to growth in the second quarter.
Manufacturing output fell 0.5 percent on the month in May
compared with expectations of a 0.2 percent rise. April's
figures were revised down to show no change instead of the 0.2
percent rise initially reported. On the year, factory output
fell 12.7 percent. []
"It seems the clutches of recession are tighter than
previously thought and it will take more than a single month of
positive data to demonstrate that we are on the right side of
the economy's trough," said Rob Pike, head of trading at spread
better ShortsandLongs.com.
However, housebuilder Persimmon <PSN.L> added 4.6 percent
after saying it does not expect any further land writedowns as
volumes and sales in the first half were better than 2008,
though it remains cautious on outlook. []
Other housebuilders pushed higher as well, with Bovis homes
<BVS.L>, Bellway <BWY.L>, and Redrow <RDW.L> up 2.3 to 4.3
percent, helped too by positive comment on Monday from RBS.
(Editing by Greg Mahlich)
