LONDON MARKETS: Commodity Shares Push FTSE 100 Higher; Anglo American Surges 20%

By Carla Mozee, MarketWatch

BOE's Carney says next interest-rate move likely to be higher

U.K. stocks climbed Thursday as commodity shares rallied on a drop in the U.S. dollar, but the pound was whipped around as the Bank of England left interest rates unchanged but suggested the next move is likely to be up.

The FTSE 100 rose 1.1% to close at 5,898.76, with shares in miners and oil and gas companies leading the benchmark to its first win in four sessions.

The moves came as the dollar lost ground against major rivals Thursday. The fall extended losses from Wednesday, when the dollar was crushed (http://www.marketwatch.com/story/risk-averse-investors-plunge-anew-into-japanese-yen-shunning-dollar-2016-02-03) after disappointing U.S. economic data was seen as putting interest-rate increases by the Federal Reserve on hold.

Oil and metals prices benefited from the dollar's pullback, as it makes them less expensive to buy for holders of other currencies. In turn, resource shares pushed higher. Iron ore and platinum miner Anglo American PLC (AAL.LN) surged 20%, its biggest one-day percentage gain since 2008. Rio Tinto PLC (RIO) (RIO) (RIO) jumped 10% and BHP Billiton PLC (BLT.LN) (BHP.AU) (BHP.AU) rose 11%. Glencore PLC (GLEN.LN) gained 16% although the commodities miner and trader's debt rating was cut by Standard & Poor's to BBB-, to the lowest level of investment grade, on sector challenges.

"After huge declines, the sector has finally decided enough is enough, and is treating short sellers to some of their own medicine," said Chris Beauchamp, senior market analyst at IG, in a note.

"Signs of a pickup in Chinese iron ore demand have begun to encourage bargain hunters within the sector, in the hope this might feed through to other metals as well. Maybe, just maybe, the sector is now the value play that investors were looking for," he added.

Royal Dutch Shell PLC (RDSB.LN) (RDSB.LN) shares leapt 6.1% although the oil major posted a near-60% slide in fourth-quarter profit (http://www.marketwatch.com/story/shell-profit-falls-almost-60-on-oil-slump-2016-02-04). Shares of BG Group PLC (BG.LN), which is being bought by Shell, picked up 4% and BP PLC (BP.LN)(BP.LN) claimed a 5.6% rise.

Swerves in sterling: The pound , meanwhile, was buying $1.4589, down from $1.4603 late Wednesday. The pound earlier hit an intraday high of $1.4669, according to FactSet, as the dollar struggled with its selloff.

The pound turned lower in afternoon trade, fetching as low as $1.4503 after the Bank of England decided to hold its key interest rate at 0.5% (http://www.marketwatch.com/story/bank-of-england-holds-key-rate-at-05-in-unanimous-decision-2016-02-04), where it has been since March 2009, as expected. The unanimous 9-0 decision came as inflation and growth outlooks for the U.K. have been dampened by the collapse in oil prices and downside risks for the global economy.

The central bank cut its 2016 U.K. growth forecast (http://www.marketwatch.com/story/boe-cuts-forecasts-for-uk-economic-growth-2016-02-04) to 2.2%, from 2.5% previously.

But the pound began to reverse losses, trading back above $1.46 after Bank of England Governor Mark Carney said the next move for the key rate is likely to up, not down, and that view was shared by all of the members of the Monetary Policy Committee.

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(END) Dow Jones Newswires

February 04, 2016 12:01 ET (17:01 GMT)

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