British shares outperformed those elsewhere in Europe on Tuesday, buoyed by a rebound in mining stocks after moves to stabilise Chinese markets helped copper higher. The FTSE 100 was up 0.7 percent at 6,137.24 points by the close following a choppy session that saw only 85 percent of the 90-day average volumes traded. The index regained some ground after suffering its worst first trading day of the year since 2000 on Monday, falling 2 percent after disappointing data from China.
When China responded on Tuesday by pumping in an estimated $20 billion to stabilise its equity and currency markets, heavily weighted mining stocks rallied along with the price of copper. The UK FTSE 350 Mining index closed up 1.9 percent. Among retailers, Next dropped 4.6 percent after the company reported disappointing sales in the run-up to Christmas, blaming poor stock availability, increased online competition and unusually warm weather in November and December.
"Holders will be happy to receive another 60p special dividend ... thanks to good cashflow, but sceptics might not like a worse net debt position and what amounts to a challenging environment in which to be a retailer," Mike van Dulken, head of research at Accendo Markets, said in a note. Sainsbury's fell 5.2 percent, the top faller, after the grocer said it had a bid for Argos- and Homebase-owner Home Retail rejected.
Home Retail surged 41.1 percent, with Sainsbury's adding it was considering its options and there was no certainty it would return with a formal offer. Traders said the price reaction suggested an improved offer from Sainsbury's was plausible. "Home Retail has always been a favourite for a takeout target, given the poor performance of late in the sector and synergies that will allow significant shareholder value to be extracted," said Atif Latif, director of trading at Guardian Stockbrokers. "The current price of (Home Retail) does not reflect close to fair value and we see this as a plausible deal ... if Sainsbury walk away, another suitor would enter the frame."
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