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FTSE led higher by commodities stocks as data eases China concerns

Sainsbury ends lower after trading statement.

British shares rose on Wednesday after better than expected trade data from China improved market sentiment, pushing oil and metals prices higher and lifting investors’ appetite for shares in mining, oil and gas companies.

Data from China overnight showed total trade in December fell much less than expected after the country let the yuan currency depreciate sharply, while it outperformed many of its regional peers in exports. 

While commodity-related stocks were slightly volatile, especially after U.S. crude fell on data showing inventories of oil surged for a second week, oil recovered to leave the FTSE’s heavyweight commodity shares in positive territory.

Energy stocks added nearly 9 points to the FTSE 100, while the materials sector, which includes miners, added more than two points.

“We’re being driven higher by those stocks which are used traditionally as a proxy for negativity in China,” Charles Hanover Investments advisory investment manager, Jonathan Roy, said. Investors were now unwinding short positions in the stocks, he said.

Britain’s blue-chip FTSE 100 index closed up just 31.73 points, or 0.5 percent, at 5,960.97 points.

It failed to close above 6,000 despite touching the level for the first time in three sessions in early trade. The index remains down more than 16 percent from a record high hit last April.

“This is a market well off last year’s peaks and struggling to keep its head above the 6,000 level,” Tony Cross, market analyst at Trustnet Direct, said in a note.

Drugmaker Shire was also among the top risers, up 3.8 percent after its chief executive said the company could achieve much higher cost savings from its planned $32 billion acquisition of Baxalta than previously expected. 

Among the decliners, Sainsbury fell 1.4 percent after a trading statement. Although its third quarter ended Jan. 9 was solid, it had rallied with the sector on Tuesday, and some elements of the report underwhelmed. 

M&A also kept investors cautious even as the grocer insisted it would not overpay in its pursuit of Argos-owner Home Retail . 

“The implication of these figures is that grocery sales in core stores appear to be down… this is a worry,” analysts at HSBC said in a note rating the stock as “reduce”, adding that they “remain unconvinced” over the merits of a deal to buy Home Retail. 

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