The FTSE 100 ground higher on Wednesday as the mining sector showed signs of life, with investors buying into the sector on the back of rising iron ore prices.
Gains in the FTSE 100 were at odds with a softer session in the US overnight, where the rip-roaring rally in US technology paused for breath.
“Markets from Wall Street to Asia eased back last night, after London’s close, as investors took profits after a winning streak. All the main US indices, the Dow, the S&P and the Nasdaq, gave up around a quarter of a percent last night,” said Steve Clayton, head of equity funds, Hargreaves Lansdown.
London’s leading index was 0.15% higher to 8,285 at the time of writing as miners ticked higher on commodity prices.
“The mining sector was a rare bright spot on the FTSE 100 on Wednesday as names including Rio Tinto and Glencore pushed higher amid stronger metal prices,” said Dan Coatsworth, investment analyst at AJ Bell.
“Just days after iron ore prices hit their lowest level in two years, the metal staged a small recovery amid hopes that stimulus measures in China could help to avoid a major slump in demand for the metal.
“Iron ore is a key component in steelmaking and is used in property construction. China has suffered from a big slump in its real estate sector, with countless properties either sitting empty or half-built. Reports that local governments in the country might be allowed to buy unsold homes received a positive reaction from the markets, but it is hard to see how this will be enough to properly rejuvenate the sector.”
Rio Tinto was 2% higher on Wednesday, while Glencore was 1% to the good. However, both stocks are down well over 10% on the year and are among the FTSE 100’s worst-performing stocks of 2024.
The FTSE 100 strong weighting towards mining means the index’s performance is heavily reliant on China. Should economic news from China improve, the recent sell-off of mining stocks presents an opportunity for the sector to recover and lift the entire index with it.
JD Sports continued to ride a wave of optimism around consumer spending on Wednesday, gaining 2.2%, as was top of the leaderboard at the time of writing. 3i Group was the top faller, down 1%, as investors booked profits after a recent rally.