Gains for the mining sector after a surge in the price of iron ore helped Britain's bluechip stock index off its lowest levels on Monday, and a rise in Old Mutual shares also lent support. The bluechip FTSE 100 index was down 17.03 points or 0.3 percent at 6,182.40 points by the close, following a three-week-long rally which has seen the index gain more than 8 percent.
Monday's drop was broad-based, with all sectors, bar the materials sector, finishing in negative territory. The sector reversed early losses to end up 4.4 percent at its highest level since October after iron ore prices surged 20 percent to an eight-month high on expectations that Chinese steel mills are planning a short-term output boost.
Glencore, Anglo American and Rio Tinto each rose between 5 percent and 7 percent. South Africa-orientated life insurance company Old Mutual was among top individual gainers, surging 6.9 percent to hit a three-month high and posting its best day since December 2011.
A media report on Saturday said the company was planning a 9 billion pound break-up which could trigger a take-over battle for its various operations. "Being (an) African-based organisation ... this emerging markets sell-off and the currency routs over the last six months put some real pressure on them, and unfortunately they're being pushed into a situation where they have to act and actually look at some disposals to shore themselves up," Charles Hanover Investments advisory investment manager, Jonathan Roy, said.
"The market's really responding to the decisive action from the board," he said. Old Mutual said it was considering all options available to it under the strategic review announced in November, but had not yet made any decision on the review process. Among fallers, InterContinental Hotels Group was down 1.9 percent after Citigroup downgraded it to "sell" and expressed caution on the European hotels sector as a whole.
"Expectations of European economic recovery, sector M&A and reasonable (mid-cycle) valuations have kept us positive on the hotel sector ... but with increasing signs of a slowing global economy a clearer trend is emerging," Citigroup analysts said in a note. Randgold fell 3 percent after Morgan Stanley cut the stock to "equal weight" from "overweight". Wealth manager St. James's Place and Standard Life bucked the trend to rise 3.4 percent and 1.4 percent respectively after British finance minister George Osborne dropped plans for a pensions overhaul.