LONDON MARKETS: Miners, Banks Rise In London; Retailers Slip

By Simon Kennedy, MarketWatch

LONDON (MarketWatch) -- U.K. stocks climbed Wednesday, helped by further strong gains for the banking and mining sectors, while retailers lost ground after a trading update from supermarket chain J Sainsbury PLC.

The FTSE 100 index rose 0.2% to 6,023.91 in afternoon trading, but the London benchmark's gains lagged behind those of other European markets.

Spanish and Italian shares led a strong rally on the Continent after a successful Portuguese bond auction and reports that the European bailout fund could be strengthened.

London-listed bank shares moved mostly higher, reflecting the gains across Europe.

Shares of HSBC Holdings (HBC) climbed 3.1%, extending gains from the previous session, when Citigroup upgraded its rating to buy.

Shares of Barclays PLC (BCS) rose 1.7%, and Standard Chartered PLC added 2.4%.

Investors bought into banking stocks ahead of the bond auction on the expectation that the sale will go well, said Yusuf Heusen, senior sales trader at IG Index.

"Investors appear positive following a spate of bond-buying from the European Central Bank and supportive comments from China and Japan," he added.

Among mid-cap financials, shares of Henderson Group jumped 9.7%. The fund manager said it would buy smaller rival Gartmore Group in an all-stock deal, with Gartmore's shares climbing nearly 12%.

Mining stocks benefited from a higher commodity prices. Shares of Kazakhmys PLC gained 2.9%, and Vedanta Resources PLC added 3.9%.

On the downside, shares of several retailers declined after the trading update from J Sainsbury . The retailer reported a 7.5% rise in total sales for the third quarter and a 5.4% increase in comparable sales, but its shares dropped 1.7%.

Seymour Pierce analyst Kate Calvert said the figures appear to confirm that Sainsbury achieved the fastest growth of the major food retailers over the Christmas period. Calvert stuck to a sell recommendation, however, saying that the growth is already reflected in the group's premium valuation when compared to rivals.

Among other retailers, shares of Tesco PLC dropped 1.3% and Marks & Spencer Group PLC slipped 0.9%.

Also lower, shares of mobile-telecom giant Vodafone Group PLC dropped 1.7% following a downgrade to equal-weight from overweight at Barclays Capital.

House builder Barratt Developments PLC saw its shares lose about 1.6%. The company reported a decline in the number of completions in the first six months of its fiscal year and said growth for the rest of the year is likely to be limited.

Shares of rival Persimmon also fell.