FTSE starts February on a high as China lifts mood

The FTSE 100 started February on a high, with investors appearing to continue January’s support for riskier assets even as the fate of eurozone nations such as Greece remains in the balance.

Surprisingly strong economic data from China boosted markets around the world, with the UK’s blue chip index starting the morning 33 points or 0.6% higher to hit 5,715. See the FTSE’s performance and the index’s top winners and losers.

Overnight Asian markets finished with small gains while Wall Street declined on Tuesday, closing its best month since October.

China’s headline purchasing managers' index, which is designed to measure the health of the manufacturing sector, was stronger than expected, rising to 50.5 in January from 50.3 in December.

Economists cautioned, however, that the figures could be misleading: ‘Though this reading is quite supportive of our soft landing call… China’s monthly macro data in January and February are significantly distorted by the different timing of the Chinese New Year (CNY) holiday,’ said economists at Bank of America Merrill Lynch.

Grant Lewis of Daiwa Capital Markets added a more upbeat note: ‘While part of the gain can be explained by the seasonal adjustment, we judge that the stronger-than-expected gain may also reflect the initial impact of credit loosening and adds to evidence that the Chinese economy is beginning to accelerate again.’

The data do, however, mean that the Chinese authorities may hold off from anticipated measures to boost the economy. 

Today investors will contend with a stream of manufacturing data for eurozone nations and the UK. Eyes will also be on a Portuguese auction of government bonds, as investors have sought ever higher yields in recent days for fear that Portugal will follow Greece to the sin-bin.

BP pain averted

Shares in BP (BP.L) rose 10.6p or 2.2% to 481p after a last-minute deal was struck to avert a strike of US refinery workers that could have reduced the energy company’s US refining capacity.

Shares in Interdealer broker ICAP (IAP.L) led the FTSE 100 gainers, even after the company reported that the last three months of 2011 had been less active than the first half. ‘The continued uncertainty in the eurozone and constraints on market liquidity, together with customers reducing risk before the year-end, led to more subdued volumes,’ warned a gloomy interim management statement.

Chemicals company Johnson Matthey (JMAT.L) was also enjoying the fruits of results day, with shares 2.49% or 51p higher to £21.02 after reporting a 34% rise in third-quarter profits and announcing its second-half earnings would be ‘slightly ahead’ of the first six months, after.

Among the losers on the blue chip board was Lloyds Banking Group (LLOY.L) after a shake-up of the management team which will see five business lines reporting directly to chief executive António Horta-Osório.