Miners lift FTSE 100 on hopes of China stimulus

LONDON (Reuters) - Miners led Britain's top share index higher early on Monday, after weak Chinese data raised the prospect that the world's biggest consumer of raw materials could do more to support faltering growth in its economy.

By 0754 GMT, the FTSE 100 was up 32.73 points, or 0.6 percent, at 5,744.21, having shed 2.6 percent over the previous eight trading days, although volumes are expected to remain low with the U.S. stock market closed for the Labor Day holiday.

Miners were the biggest gainers on Monday, having underperformed over the last five days, falling 4.1 percent compared with a 1.1 percent decline on the broader FTSE 100.

The main catalyst was expectations that China would soon act after its vast manufacturing sector was badly hit by slowing new orders, two complementary surveys showed.

"Some form of stimulus is likely, whether it is purely monetary or whether they will have to think of fiscal stimulus is an open question, because if the economy is slowing at the pace it appears to be then it has to be all hands to the pump," Peter Dixon, economist at Commerzbank, said.

Miners' second-quarter earnings fell on average by 44 percent due to the decline in demand from China.

FED UP

The prospect for further stimulus to boost waning global growth is critical for markets.

Following Federal Reserve chairman Ben Bernanke's speech on Friday, where he left the door open for more monetary easing, attention is now on the European Central Bank meeting this week with expectations that president, Mario Draghi, will unveil some form of stimulus plan.

"As ever markets are probably expecting too much from President Draghi and his colleagues; the retreat in risk assets in recent days has begun to recognise the potential for disappointment," Ian Williams, equity strategist at Peel Hunt, said.

He said the challenge for Draghi will be to provide more details of the new framework for bond purchases without pre-judging subsequent political and legal developments.

In a note, Societe Generale said it expected new clues, but with final details only after a German Constitutional Court ruling on September 12 that may affect the ECB's bond-buying plans, although a rate cut may come this week.

Among the main fallers on the FSTE were technology firms Arm Holdings and CSR down 2.2 and 1.4 percent respectively after Deutsche Bank cut both firms to "sell", mainly on valuation grounds.

(Editing by Erica Billingham)

Source: http://news.yahoo.com/ftse-flat-investors-remain-wary-eu-action-071909353--finance.html

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