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FTSE eyes third day of gains

Miners rally as FTSE 100 extended gains into a third consecutive session.

A woman walks past a stock exchange board. Picture: AFP.

Chinese data showed imports into the world's top metals consumer rising nearly three times faster than expected in March, year-on-year.

The news boosted Britain's miners and industrial metals, with some investors seeing value in what have been the two worst performing FTSE 350 sectors this year with losses of 9 and 23 percent, respectively.

Forecast-beating production numbers from Vedanta Resources also helped sentiment, with the stock up 3 percent.

The blue chip FTSE 100 index was up 36.88 points or 0.6 percent higher at 6,350.09 by 0803 GMT.

The gains have pushed the benchmark index through technical support at the 60-day moving average, potentially opening the door to more gains from a charts perspective and nudging the FTSE 100 back towards last month's five-year high of 6,533.99.

"If you look at the overall level of the FTSE, we are probably going to take the highs again," said Richard Curr, head of dealing at Prime Markets.

But he was more cautious on the longevity of the rally in miners.

"We've had some decent Chinese data out, which has pushed this up in the last few days, but we think that this bounce is short term and the overall trend is down, so we are looking for the opportunities to sell again," he said.

"Vedanta had some decent numbers out. That's a share we might want to be long for a few days, as there could be some broker comment coming out that could be a bit more positive. But the overall trend (on basic resources) is negative and these periods of up-days just create another selling opportunity."

Miners are seen as a weak spot for profits, with Thomson Reuters StarMine SmartEstimates forecasting a 5.5 percent drop in earnings for the sector this year, against a rise of 2.1 percent for the FTSE 100 as a whole.

They also offer a below-average dividend yield - currently at 3.2 percent versus the blue chip index's 3.6 percent - thus lagging on one of the key criteria for investors looking for income at a time of ultra-low government bond yields.

The focus on dividends was highlighted again on Wednesday by the rally in Easyjet, whose shares jumped 3.8 percent in heavy volumes after Citi upgraded the airline to 'buy', saying high cash flow should support high payouts to shareholders.

"Sustainably positive free cash flow generation supports dividend growth and possibly more special dividends," Citi's analysts said in a note.

"... an abnormally large free cash flow of circa 700 million pounds ($1.07 billion) that we expect for FY13, due to an unusually high amount of sale and leasebacks, could easily fund a special dividend of circa 140 million pounds, similar to that paid two years ago."

Timeline

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