LONDON: Britain's top share index hovered just below last month's record highs on Thursday as miners gained ground on expectations that China, the world's largest metals consumer, will launch more stimulus measures to support its economy.
The UK mining index rose 0.6 percent, the top sectoral gainer, after a survey showing Chinese factory activity contracted for a third month in May indicated a persistent weakness in the world's second-largest economy.
"Investors are viewing 'bad news as good news'. I feel China will continue to be aggressive and cut rates and launch other forms of stimulus to meet its growth targets," IG market analyst David Madden said.
China's central bank is widely expected to cut interest rates further in coming months, on top of three reductions since November, and may also lower banks' reserve requirements again to reduce companies' borrowing costs and encourage more lending.
Mining stocks such as BHP Billiton, Fresnillo and Rio Tinto rose 1.1 to 1.4 percent.
The blue-chip FTSE 100 index was flat at 7,005.28 points by 1100 GMT, leaving it less than 2 percent below a record high of 7,122.74 points reached in April. The FTSE remains up by around 7 percent since the start of 2015.
"We stand by 7,100 points as a near-term target for the FTSE. We are still buyers of this market," said Thames Capital Markets' trader Gerren O'Neill.
The market showed little reaction to data showing British retail sales rose more strongly than expected in April, recovering from a surprise fall in March, as unusually warm weather encouraged shoppers to buy new clothes.
Luxury goods group Burberry fell 0.5 percent as several brokers reduced their price targets on the company's shares. Burberry shares slumped by 5 percent on Wednesday after the company cut its 2016 profit guidance.
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