FTSE rallies 40pts Xstrata board approves improved Glencore offer

The FTSE 100 rallied 0.8% in early trading on Monday led by gains in heavyweight miners and banking stocks as investors moved to buy back into the markets after the UK index lost around 3% in the last two weeks.

Today’s recovery in stock prices helps to confirm the bullish near term trend line to which the FTSE 100 has bounced from on each of the last 5 times there has been a small correction in the markets. A close back above the 5820 level is needed for the confirmation that support lines have held.

Xstrata’s board finally gave their blessing for Glencore’s improved offer of $33bn, lifting the share price of Xstrata by 1.7% and weighing on Glencore’s shares price by 0.7%. Xstrata said that they approved the revised offer, which came after major shareholders indicated they would vote down the initial proposal, but maintained that they would do so only on the condition that shareholders also support the controversial pay package aimed at retaining key managers for at least two years, which is a controversial issue. Glencore’s new offer of 3.05 new shares for every Xstrata one held came after a surprise last minute meeting a few weeks ago that was chaired by the former Prime Minister Tony Blair, who is a consultant for one of the banks brokering the deal.

Heavyweight mining stocks also received a lift from broadly in line data out of China. Chinese CFLP Manufacturing PMI came in at 49.8, just below expansion territory and below consensus forecasts of 50.0 but did recover from a previous reading of 49.2. The rise helps to ease concerns over even weaker Chinese data but also keeps the potential for further monetary easing in play by the People’s Bank of China.

There is a raft of economic data due out today in the shape of German, EU and UK manufacturing this morning at 9am, euro zone unemployment at 10am and US manufacturing and construction spending at 3pm.