UK's top share index rises

Britain's top share index rose on Monday as miners helped lead a continued recovery that started on Friday when the US Federal Reserve cut its discount rate, but lingering credit worries limited gains. Britain's FTSE 100 index ended 0.2 percent higher, up 14.5 points at 6,078.7 but this was well off the day's high of 6,163.4.
Miners, which lost heavily in the recent market turmoil, were the best performing sector, adding more than 17 points to the index. The Fed surprised markets on Friday when it cut its discount rate half a percentage point to 5.75 percent to beef up the banking system which is facing a credit squeeze as a crisis in US subprime mortgages has spilt over to banks.
Despite the relief rally analysts said there could be more gloom ahead since the extent of the potential US subprime fall-out on the credit market was still uncertain. "This is probably going to end up looking like a brief period of calm in a bigger storm," said Tim Hughes, head of sales trading at IG Index. "I think the volatility that we've seen of late is here to stay for some weeks and some months yet."
Miners have been hard hit in recent sessions on the view that the credit troubles could hurt economic growth and thus appetite for commodities. But on Monday bargain-hunters came in and BHP Billiton, Kazakhmys and Rio Tinto rallied between 3.2 and 4.2 percent. Rio also said it was not concerned about the potential for rising borrowing costs for its debt-funded $38.1 billion take-over of Alcan.
But banks and real estate stocks continued to struggle on lingering credit worries limiting the gains for the overall market. British Land was the main loser, down 3.5 percent, Land Securities fell 1.9 percent and Hammerson gave up 1.5 percent. Banks took more than 8 points off the index. Standard Chartered fell 2.5 percent and HBOS gave up 0.7 percent.
HSBC shed 0.9 percent after it said it was in talks to buy a majority stake in Korea Exchange Bank, valued at $4.5 billion and held by Lone Star. But Northern Rock rebounded 0.9 percent after the lender was jolted recently on concerns that increased borrowing costs could hit its revenue. The stock was also lifted by renewed speculation that it could be a target for Lloyds TSB or another predator. Both Northern Rock and Lloyds declined to comment.
Barclays lost 0.8 percent after traders said it was the likely winner of ABN Amro because the credit market turmoil had raised concerns about a Royal Bank of Scotland-led consortium's financing of its offer for the Dutch bank. RBS ended up 0.3 percent. Morrison Supermarkets rose 2.1 percent after Citigroup said it foresees "a great deal of cash being returned to shareholders".
Its chairman Ken Morrison reiterated he is reviewing his 10 percent stake in the supermarket group, the Sunday Times reported. Also in the food retail sector Tesco eased 0.7 percent one day after Britain's competition watchdog asked Tesco and Asda to hand over millions of emails as it investigates whether they are exerting undue pressure on suppliers.