FTSE 100 climbs for fourth straight session

The FTSE 100 climbed for a fourth consecutive trading session on Thursday, with the UK Index boosted by gains in mining stocks after data from China helped to ease concerns over an aggressive slowdown in activity, for now.

The FTSE 100 closed higher by six points at 5921, tracking similar gains across broader European indices such as the DAX and CAC.

Most of the gains in the UK Index were in part down to higher demand for mining stocks, which bears a heavyweight influence on the FTSE 100.  Mining stocks such as Rio Tinto, BHP Billiton and Kazakhmys all saw decent gains of around 2% in trading today thanks to confidence boosting data out of China before the UK trading session began.

Chinese GDP cooled to 7.4% from 7.6% on an annual basis in the last quarter, in line with expectations, but at the same time industrial production rose stronger than expected at 9.2% whilst retail sales also beat forecasts to come in at 14.2% on an annual basis. The data helped to increase confidence that Chinese metal demand may not necessarily weaken as strongly as is currently feared. This ‘fear’ had been exacerbated of late by the profit warnings of US tech and construction bellwethers such as Caterpillar and Intel, whilst various downgrades on Chinese growth from Rio Tinto and BHP Billiton have also kept investor expectations fairly low. With today’s Chinese data roundly beating expectations, particularly on the industrial production side, this has played into the hands of bull enthusiasts and has convinced investors to buy into mining stocks.

Of course, there is a catch-22 situation with most Chinese data. Stronger than expected Chinese data lessens the pressure on the People’s Bank of China (PBOC) to act in terms of stimulus and rate cuts. Given that Central Bank policy, such as the Fed’s additional $40bn monthly purchases and the ECB’s Outright Monetary Transactions, have been used as an effective mental stop loss for investors buying into the market, and thereby boosting the FTSE’s near term bullish trend, many traders are still waiting on and expecting China to act too. Therefore, whilst today’s Chinese data is well taken, it needs to be taken with a pinch of stimulus salt.

Oil stocks have traded weakly today, keeping a leash on the FTSE’s charge as a result, with the FTSE 350 energy sector losing 0.35% and tracking weaker crude oil prices, where Nymex Crude oil fell over 1% in afternoon trading.

A look at the forex markets echoes a theme of euro profit taking, with the single currency losing 0.16% against the US dollar and 0.1% against the pound. The euro’s strength over the last week has been impressive, but the fragile currency has failed to break above resistance of $1.3170, which it needs to do before it can target $1.33 and $1.35.