Reuters – Britain’s top shares index rose on Monday, as firmer mining stocks helped the market build on last week’s recovery from a slump caused by the UK’s decision to leave the European Union.
The blue-chip FTSE 100 index, which had risen in the four previous sessions, was up 0.1 percent at 6,583.67 points in early session trading, having earlier touched its highest level since August 2015.
Mining stocks were among the best performers, helped by a rise in London copper prices.
Gold and silver miner Fresnillo rose 6.5 percent after confirming its 2016 production guidance late on Friday.
Expectations that China – the world’s biggest consumer of metals – would undertake new stimulus measures to boost its economy lifted other mining stocks.
The FTSE 100 fell around 6 percent and sterling tumbled against the dollar after Britain’s June 24 vote to quit the EU.
However, sterling’s weakness has provided a cushion to the FTSE 100 since many of the index’s international companies can benefit from a weaker pound which would help exports.
“Regionally, we believe FTSE 100 will remain a surprise outperformer, currency hedged,” said JP Morgan Cazenove equity strategist Mislav Matejka.
Nevertheless, Matejka and several others remained cautious over the market outlook, given the risks generated by Britain’s vote in favour of “Brexit”, with the domestic UK economy expected to weaken as a result of it.
While the FTSE 100 has recovered since June 24, the index remains down by around 10 percent in U.S. dollar terms since the Brexit vote, as the slump in sterling has reduced the value of the UK market in dollar terms.
Data on Monday also showed Britain’s construction industry suffered its worst contraction in seven years in June as concerns over Brexit grew, and property and construction stocks such as Land Securities and Persimmon fell.
Matejka expected the market rally to fade away, and backed being “overweight” in defensive stocks with solid cash-flows and dividends.
“At the moment, we have seen selling at these levels, reducing exposure into any rallies that present themselves such as the recent move higher in GlaxoSmithKline. Many are opting to sit in cash, waiting for a market pull back,” added Lewis Jones, stockbroker at Cornhill Capital.
By Sudip Kar-Gupta