London midday: Strong start to Q4; Footsie up one per cent

1st Oct 2012 11:24

- Investors taking advantage of underpriced stocks, says analyst- Asian and UK data disappoints- Xstrata rises after agreeing terms with GlencoreLondon's blue-chip index gained strongly in morning trading on Monday with increased risk appetite benefitting the banking and mining sectors as stocks markets across Europe shrugged off some gloomy economic data from Asia and the UK to start the fourth quarter strongly.The Bank of Japan's quarterly Tankan survey for large manufacturers fell from -1 to -3 in September, its fourth negative reading. Meanwhile, the HSBC/Markit China manufacturing purchasing managers' index (PMI) stayed below 50, which continues to indicate contraction in the sector. Economic figures from the UK wasn't much better either: the manufacturing PMI fell from 49.6 to 48.4 in September, while total lending to individuals fell unexpectedly in August.Market analyst Craig Erlam from Alpari said: "European indices are trading more than 1% higher this morning, with investors taking advantage of underpriced stocks as a result of traders locking in profits at the end of the third quarter. "There appears to be a lot of optimism surrounding the fourth quarter, with Spain expected to request a bailout, potentially as early as this week," he said.Friday's release by auditor Oliver Wyman estimated that the Spanish financial sector would need €59.3bn in funds in order to stay afloat, well within the €100bn limit given by the European Union.FTSE 100: Xstrata and Glencore agree terms The big news of the morning was that the so-called merger of equals between commodities trader Glencore and mining titan Xtsrata is back on after the independent directors of the latter agreed to Glencore's terms. Jefferies reiterated its positive stance on both stocks this morning, saying that they while they may underperform after the shareholder votes later this year, the combined 'Glenstrata' entity will be one of its top picks for the long term. Banking stocks were in demand with Royal Bank of Scotland, Lloyds and Barclays benefiting from ratings upgrades from Liberum Capital, which lifted its recommendation on all three to 'buy'. Supermarket group Sainsbury was in the red ahead of its second-quarter trading statement on Wednesday. Sector peer Tesco, which reports its interim results on the same day, was making gains today despite a ratings downgrade from Seymour Pierce from 'hold' to 'reduce'; the broker cited poor visibility as a reason behind the move. Defence group BAE Systems was wanted this morning after itself and aerospace titan EADS revealed details of its proposed £28bn tie-up. "There comes a time when it is right to seize the moment, and to create something that is even stronger and better. We believe that time is now," the companies' CEOs said in a joint statement.Meanwhile, tobacco groups British American and Imperial were up after some positive comments from Investec today. "The NHS wants us to stop smoking for October. We respond by going long on UK tobaccos," said analyst Martin Deboo. The broker has raised its rating on BATS from 'hold' to 'buy' and renewed its 'buy' recommendation for IMT.FTSE 250: SuperGroup continues to be superSuperGroup continues to extend gains after its impressive results announced last month, in which it reported a 10% increase in total sales in the first quarter. Including today's near-9% rise, shares have gained 35% in the past month.House builder Taylor Wimpey was a high riser after Citi upgraded its rating on the stock. Sector peer Barratt Developments was also on the up.International investment group Caledonia rose after buying a portfolio of five industrial business from US-based operating company Latshaw Enterprises for $42m.FTSE 100 - RisersAnglo American (AAL) 1,875.50p +3.22%Xstrata (XTA) 985.00p +2.87%Schroders (SDR) 1,559.00p +2.70%Barclays (BARC) 220.45p +2.61%Croda International (CRDA) 2,486.00p +2.52%Rolls-Royce Holdings (RR.) 863.50p +2.43%Wolseley (WOS) 2,706.00p +2.42%Shire Plc (SHP) 1,857.00p +2.37%Eurasian Natural Resources Corp. (ENRC) 315.20p +2.11%Experian (EXPN) 1,050.00p +2.04%FTSE 100 - FallersCRH (CRH) 1,184.00p -0.67%Babcock International Group (BAB) 922.00p -0.54%Sainsbury (J) (SBRY) 345.80p -0.49%Morrison (Wm) Supermarkets (MRW) 284.70p -0.18%Kingfisher (KGF) 263.90p -0.11%SSE (SSE) 1,391.00p -0.07%BP (BP.) 436.30p -0.05%FTSE 250 - RisersSupergroup (SGP) 649.50p +8.70%Homeserve (HSV) 218.00p +3.81%Pace (PIC) 165.30p +3.77%RPS Group (RPS) 258.10p +3.65%Spectris (SXS) 1,784.00p +3.42%Barratt Developments (BDEV) 175.10p +3.30%COLT Group SA (COLT) 122.90p +3.19%New World Resources A Shares (NWR) 273.00p +3.02%Taylor Wimpey (TW.) 55.90p +2.95%Rank Group (RNK) 149.30p +2.89%FTSE 250 - FallersSavills (SVS) 391.40p -1.83%WH Smith (SMWH) 636.50p -1.55%ITE Group (ITE) 203.10p -1.46%Bumi (BUMI) 148.00p -1.33%Fidessa Group (FDSA) 1,453.00p -1.22%Computacenter (CCC) 376.20p -1.00%Unite Group (UTG) 261.10p -0.95%Provident Financial (PFG) 1,360.00p -0.95%Mondi (MNDI) 624.00p -0.95%Stobart Group Ltd. (STOB) 116.60p -0.93%BC