FTSE rebounds as miners and banks go cheap

The FTSE 100 has continued recent fluctuations today as the index’s eight month low yesterday has left bank and mining stock looking extremely cheap.

Rob Hull
shareprices.com - Wednesday, May 26, 2010

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Mining stock has rebounded well this morning

Fears over eurozone recovery following a Spanish bank bailout and concerns over the fragility of relations between North and South Korea slammed the blue-chip index under 5,000 points at the close of play yesterday – the first time that’s happened since October 2 last year.

However, the index opened more than 1.3 per cent up and has climbed above the 5,000 ceiling before 09:00BST, gaining over 80 points or 1.8 per cent.

The top index plummeted 2.5 per cent in trading yesterday after reports emerged that the Spanish Government had to bailout a small local bank, once again reiterating eurozone economy fears for investors who shied away from banking stock for the duration of the day.

And reports that North Korean leader Kim Jong Il had put his military on combat alert after being accused of sinking a South Korean warship in March taking the lives of 46 sailors increased concerns over an outbreak of war between the neighbouring nations. The potential outbreak of war pounded global indices as well as the FTSE 100 with Asian stock feeling the brunt of the scare.

However, a late rally on Wall Street to finish flat last night and Asian investors going on a bargain stock spree has improved the outlook for the FTSE 100, if only in the short term anyway.

This morning the stock that contributed most to yesterday’s rapid decline are the same ones to rebound strongest.

Lloyds Banking Group (LON:LLOY), which was heading the fallers charts around the same time yesterday with declines in the region of seven per cent, is the leading improving stock with gains of almost five per cent at 09:00BST.

Royal Bank of Scotland (LON:RBS) and Barclays (LON:BARC) shares also played their parts is the FTSE’s slump yesterday, but are currently trading between three and four per cent in the opening hour of the market.

Investors are also making the most of cheap opening prices in the mining sector. Lonmin (LON:LMI), Kazakhmys (LON:KAZ), Xstrata (LON:XTA), Rio Tinto (LON:RIO) and Antofagasta (LON:ANTO) have all improved their share price by over four per cent in early trading.

And Eurasian Natural Resources (LON:ENRC), which was the worst performing mining stock in early trading yesterday with losses in excess of six per cent, has gained almost four per cent this morning to complete a strong rebound for mining stocks.

At 09:30BST the FTSE 100 index is up 1.6 per cent at 5020.67 with an 80 point gain.

 

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