LONDON MARKETS: Rio Tinto Gets Knocked As CEO Leaves; FTSE Up

By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) -- Rio Tinto PLC led the way lower in London after the departure of the company's top executive and a $14 billion charge, but the overall market got a boost by the afternoon after a batch of upbeat U.S. economic data.

The FTSE 100 index rose 0.3% to 6,123.43. The index closed at 6,103.98, down 0.2%, the prior day.

Mike McCudden, head of derivatives at stockbroker Interactive Investor, said the biggest test for markets this week remains Chinese data due Friday. Mining stocks, a heavyweight sector in the London market, are especially sensitive to economic signals out of China.

"We are however continuing to see profit taking from investors thanks to the recent rally but as yesterday's performance showed, with every wave of selling there emerges a new tranche of investors ready to buy in on the dips," he wrote in emailed comments.

Economic data from the U.S. inspired some gains for London in the afternoon. U.S. housing starts surged to a four-year high in December, blowing out economists forecasts.

Shares of Rio Tinto (RIO) fell 0.7%, after an earlier fall of more than 2%, pressured after Tom Albanese exited as chief executive on news that the Anglo-Australian mining group will book a $14 billion impairment charge for its aluminum assets and well coal assets in Mozambique.

The stock got a boost of confidence from Citigroup, which lifted shares to buy from neutral, advising investors not to overreact to the day's news.

"One of our structural bearish criticisms of the sector has been poor capital allocation, and lack of shareholder focus. We believe today's announcement could significantly realign Rio Tinto with shareholder interests through reduced M&A and reduced capex spend," the analysts said in a note.

Also on the downside, shares of Aberdeen Asset Management PLC fell 1.8%. The asset manager said assets under management at the fiscal-year end rose to 187.2 billion pounds from 169.9 billion pounds.

On the upside, shares of Associated British Foods PLC jumped 5.2%. The diversified food, ingredients and retail company reported revenue for the first 16 weeks was 10% ahead of last year, adding that it now expects to make more progress in full-year adjusted operating profit.

Banks nosed higher as well, with HSBC Holdings PLC (HBC) up 0.5% and Barclays PLC (BCS) adding 0.6%.

Deutsche Bank released a positive note on the sector Thursday, where analysts said they're turning more cautiously optimistic on the trend for provisions for payment protection insurance. Many U.K. banks have had to take provisions for the misselling of such insurance.

"Though we would not be surprised to see 'top-ups' to provision levels in 4Q12 results, we think banks already hold significant capacity for future repayments at current claim rates, and that recent redress and search volumes suggest claims may be slowing," the analysts wrote in a note.

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