FTSE snaps 3-day losing run, up 1% on commodities

Wed Aug 20, 2008 12:07pm EDT

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* FTSE 100 ends up 1 pct * Commodities rally on firmer crude and metal prices * BT, Barclays fall after going ex-dividend

LONDON, Aug 20 (Reuters) - Britain's top share index ended 1 percent higher on Wednesday, snapping a three-session losing run, as commodity stocks rallied on the back of firmer metal and crude prices.

The commodity-heavy FTSE 100 .FTSE closed up 51.4 points at 5,371.8, after losing 3.2 percent in the previous three sessions.

The UK benchmark is down nearly 17 percent for the year on recession fears as well as rising inflation concerns and the impact of credit-related losses on financial institutions.

"Commodities are seeing a bit of a bounce but I am still a bit cautious," said Tim Whitehead, head of portfolio services at Redmayne-Bentley.

"It's better to be sitting on your hands at the moment," he said, adding that volume was thin with many traders and fund managers were away on holiday.

Miners held onto earlier gains after metal prices eased in late trade. Rio Tinto (RIO.L: Quote, Profile, Research, Stock Buzz), BHP Billiton (BLT.L: Quote, Profile, Research, Stock Buzz), Xstrata (XTA.L: Quote, Profile, Research, Stock Buzz), Anglo American (AAL.L: Quote, Profile, Research, Stock Buzz) and Eurasian Natural Resources (ENRC.L: Quote, Profile, Research, Stock Buzz) put on 1.9 to 7.4 percent.

Energy stocks also rose, with BP (BP.L: Quote, Profile, Research, Stock Buzz) rising 0.7 percent, Royal Dutch Shell (RDSb.L: Quote, Profile, Research, Stock Buzz) gaining 2.1 percent and BG Group (BG.L: Quote, Profile, Research, Stock Buzz) up 4.4 percent, even though crude prices CLc1 slipped in late session.

Oil explorer Tullow Oil (TLW.L: Quote, Profile, Research, Stock Buzz) soared 6.8 percent after positive comments in research notes. UBS upgraded the stock to "buy" from "neutral" based on valuation and added that further exploration success could also make Tullow an M&A target.

Talks of China, one of the biggest metal and energy consumers, to introduce a stimulus package to jump-start growth also added a fillip to sentiment, with Asian stocks .MIAS00000PUS recovering from a two-year.

"There were concerns that after the Olympic Games some of the Chinese economy might start to drop off the cliff slightly but it looks very much like that isn't going to be the case," said Richard Hunter, head of UK equities at Hargreaves Lansdown.

"Underneath all that, trading volumes are very thin. The market is reasonably directionless, so you do get those slight swings in volatility."

In the UK, Bank of England minutes showed that policymakers were split three ways in August for a second month running, with one voting to hike interest rates, another to cut but the remaining seven deciding to keep borrowing costs steady at 5 percent.

Banks were mixed in a volatile session, with Barclays (BARC.L: Quote, Profile, Research, Stock Buzz) and Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) down. But Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz), HBOS (HBOS.L: Quote, Profile, Research, Stock Buzz), HSBC (HSBA.L: Quote, Profile, Research, Stock Buzz) and Standard Chartered (STAN.L: Quote, Profile, Research, Stock Buzz) were up.