Britain’s top share index extended gains on Monday, with miners leading the way after the world’s top metals consumer and number two economy China cut interest rates during the week-end to spur growth.
The blue-chip FTSE 100 index was up 0.5 per cent at 7,081.23 points by 0811 GMT after surging 2.3 per cent on Friday following the Conservatives’ unexpected national election victory. The index was within touching distance of a record high of 7,122.74 points set last month.
Shares in basic resources companies BHP Billiton, Anglo American and Glencore rose 1.8 to 2.2 per cent.
The UK mining index rose 1.8 per cent, the top sectoral gainer, after China cut rates for the third time in six months in a bid to lower companies’ borrowing costs and revive a sputtering economy that is headed for its worst year in a quarter of a century.
“We are seeing a knee-jerk reaction to China rate cut, but I don’t think the bounce in mining shares is sustainable,’’ Peter Dixon, equity strategist at Commerzbank, said.
“Ultimately what matters is the demand for metals and I can’t see how the Chinese rate cut is going to make any material difference. There has been a lot of investment to increase capacity over the past years and in many mining areas we are now struggling with over-capacities.’’
The mining index is up just 3.5 per cent this year against an 8 per cent rise for the benchmark FTSE 100 index.
Energy shares were also in demand, with the UK Oil and Gas index rising 0.9 per cent, tracking a rise in crude oil prices.
Among some significant movers, Sage Group rose 3.4 per cent to 561.5 pence after Goldman Sachs raised its price target for the stock to 565 pence from 540 pence.
Aberdeen Asset Management fell 1.2 per cent to 446 pence after Societe Generale cut its stance on the stock to "hold" from "buy" and trimmed its target price to 485 pence from 490 pence.
The Bank of England will announce its first monetary policy decision under the new Conservative government on Monday. It is unlikely to throw in any surprises and is widely expected to keep interest rates unchanged at record lows.