By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- Britain's benchmark stock index edged
higher on Friday, with the mining sector buoyed by growth data from
China and shares of Rio Tinto PLC rebounding after the previous
session's decline.
The FTSE 100 index rose 0.6% to 6,166.28, following a 0.5% gain
Thursday after markets drew support from stronger U.S. economic
data.
Miner Rio Tinto PLC (RIO) was among London's heavy hitters
moving higher on Friday, up 2% after losing 0.5% by the end of the
prior day. It had been hit harder in the session earlier owing to
the departure of the company's chief executive on the back of a $14
billion impairment charge.
Analysts at Barclays Research said Friday that the departure of
CEO Tom Albanese and those writedowns will herald a new era for the
company. "We believe these decisions are an attempt by Rio's board
to draw a line under the past five years of poor capital allocation
in M&A and re-establish themselves as the industry leader in
cost control both capital and operational," the analysts said in a
note.
Goldman Sachs said the events leave Rio "looking for some
goodwill in the market. To that extent, we believe Rio may look to
give shareholders what they want, which is cash back." They said
the potential of a buyback being announced in Rio Tinto's full-year
results has risen.
News of stronger-than-expected growth out of China underpinned
London's mining sector.
In the U.K., however, retail sales rose at their slowest annual
pace for two years in December, adding to worries the economy
shrank in the final quarter of 2012.
Barclays upgraded Meggitt PLC to overweight from equalweight,
saying the engineering company that specializes in aerospace
equipment's 20% valuation discount to peers is due to close. That
will come as investors in the aerospace cycle look away from the
pricier pure-play names. Meggitt and U.S-based Rockwell Collins
Inc. (COL) are also good late-cycle plays. Barclays lifted its
price target 16% to 520 pence. Meggitt shares rose 1.7%.
Among other movers in London, shares of Diageo PLC (DEO) rose
over 1%. Consumer conglomerate Unilever PLC (UL) rose 1%.
In the food and consumer space, J Sainsbury PLC fell 1% after
Goldman Sachs added the grocery chain to its conviction sell list,
saying cash flow and balance sheets are a risk as momentum
slows.
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