Strength in oversold commodity issues fuelled a modest rally by Britain's top share index on Tuesday, while sovereign debt worries continued to dog banking stocks. At the close, the FTSE 100 index was up 26.79 points, or 0.5 percent at 5,896.87, having dropped 2 percent on Monday to hit its lowest level since March 23 after S&P cut its credit outlook for the United States to negative.
"A bounce back following Monday's plunge was to be expected, but the moderate nature of it indicates that investors are unsure there will be any really solid advance in the near term," said Mic Mills, head of electronic dealing at ETX Capital. Specialty mining and metals was the top performing sector as UK blue chips saw some of Monday's flight from risk reversed. Precious metals group Fresnillo was the best sector performer, adding 3 percent as the price of gold hit record highs near $1,500 an ounce for a second successive day.
-- Banks worst-performing sector
Integrated oils also recovered after Monday's falls as crude prices ticked higher, with BG Group up 0.8 percent. Banks, however, were the worst performers, led by part-nationalised lenders Royal Bank of Scotland and Lloyds Banking Group, down 0.6 percent and 0.5 percent, respectively, as global sovereign debt concerns kept them on the back foot.
Barclays slipped 0.1 percent ahead of first-quarter results due next week. The sector got no help from forecast-beating first-quarter results from US peer Goldman Sachs, as the Wall Street bank warned there were fewer opportunities to make money in the current environment. US blue chips were flat by London's close, as early strength from earnings news from Goldman and healthcare conglomerate Johnson & Johnson dissipated.
Burberry was the top blue chip performer, up 6 percent after the luxury products group said fourth-quarter sales beat forecasts and would push full-year profit to the top end of expectations. French peer LVMH also boosted sentiment for the sector as its first-quarter sales beat expectations. On the high street, Marks & Spencer added 1.5 percent as Citigroup raised its recommendation to "buy" from "hold" saying it sees the retailer as a "major beneficiary of the improving outlook for the older UK consumer".
But the world's third-largest retailer Tesco fell 1.6 percent after its full-year results - the first to be delivered by new CEO Philip Clarke - fell short of expectations in a tough home market.
"Overall, we believe the new CEO has made a decent start. However, the group has plenty to do to prove to the market that it can achieve its targets, especially in the core UK business," said Killik & Co in a note. Other retailers suffered with the slightly disappointing news from Tesco, with blue chip Next down 0.5 percent, while second liners Dixons Retail and Home Retail Group shed 3.3 and 3.2 percent, respectively. Home Retail reports full-year results on Thursday.
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