By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- Britain's benchmark stock index gained
ground Friday with the mining sector buoyed by growth data from
China, as shares of Rio Tinto PLC rebounded a day after taking a
massive write-down.
The FTSE 100 index rose 0.6% to 6,168.29, 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, it shares adding 2.7% after having lost
0.5% on Thursday. It had been hit even harder earlier in Thursday's
session, on the back of a $14 billion impairment charge and the
exit of its chief executive.
Analysts at Barclays Research said Friday that the departure of
Tom Albanese as CEO and the write-downs 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.
Separately, Goldman Sachs said Rio is now "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." The
potential of a buyback being announced in Rio Tinto's full-year
results has risen, they said.
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.
Also Friday, Barclays upgraded Meggitt PLC to overweight from
equalweight, saying that a valuation discount for the engineering
company that specializes in aerospace equipment -- pegged at 20% to
its peers -- is due to close.
That will come as investors in the aerospace cycle look away
from pricier pure-play names, the brokerage said, calling Meggitt
as well as U.S-based Rockwell Collins Inc. (COL) good late-cycle
plays. Barclays lifted its price target on Meggitt by 16%, to 520
pence.
Meggitt's shares rose 2%.
Among other movers in London, shares of Diageo PLC (DEO) rose
1.3%, while consumer-goods conglomerate Unilever PLC (UL) gained
0.4%.
On the downside, shares of J Sainsbury PLC fell 0.8%. Goldman
Sachs added the grocery chain to its conviction sell list, saying
cash flow and balance sheets are at risk as momentum slows.
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