London open: Sainsbury's and mining stocks bolster markets ahead of Fed

UK stocks rose for the second straight day on Tuesday, helped by a strong performance on Asian markets overnight, ahead of the start of the Federal Reserve's two-day policy meeting.

The FTSE 100 was up 0.5% at 6,839.30 early on, helped by decent gains from a host of stocks in the mining and energy sectors, and grocer Sainsbury's after a well-received trading update.

Chinese stocks finished at their highest in nearly seven years on Tuesday, on continued speculation that Beijing will step in to bolster growth if needed. Premier Li Keqiang said the government still had stimulus measures up its sleeve to take.

Meanwhile Japanese shares reached a 15-year high after the Bank of Japan maintained its ¥80trn stimulus programme. The central bank said that the slowdown in inflation is only temporary and maintained a relatively confident tone on the country’s economic outlook.

All eyes on the Fed

While no change is expected in policy when the Fed meeting concludes on Wednesday evening, markets will be watching the central bank's forward guidance closely, given recent speculation that policymakers could hike interest rates sooner than expected.

Economists say the Federal Open Market Committee (FOMC) is likely to remove the word 'patient' from its statement on the timing of policy tightening.

"Given the better-than-expected labour market data [over January and February], the FOMC is likely to open the door to a June rate hike. In fact, the Fed seems intent on preparing the markets for the first rate hike," said analysts at Rabobank.

Sainsbury's and resource stocks provide a boost

Sainsbury's posted a 1.9% fall in fourth-quarter like-for-like sales excluding fuel, not as bad as many had feared, helping the stock higher early on. Having cut prices on over 1,100 items and simplified its promotional offers, the supermarket group warned that pricing pressures were likely to continue.

Mining stocks were mostly higher, including Glencore, Rio Tinto and Anglo American.

Heavyweight miner BHP Billiton also rose after shareholders welcomed the company's recommendation to approve its proposed demerger as it spins off its non-core activities into a new company called South32. The group said one-off costs associated with the transaction would be $738m, though it promised not to cut its dividend post-demerger.

Platinum miner Lonmin surged after appointing Ben Moolman as its new chief operating officer to place Johan Viljon who resigned one month ago. Moolman is already a member of the executive committee.

However, Antofagasta was bucking the trend after profits sank by a more-than-expected 18% in 2014, prompting the company to slash its dividend by 77.4%. The miner also warned of "some inherent uncertainty" surrounding flagship Los Pelambres project in Chile.

Oil and gas stocks such as Tullow Oil, BG Group and Shell were higher early on.

Market Movers
techMARK 3,221.48 +0.03%
FTSE 100 6,839.30 +0.52%
FTSE 250 17,222.38 +0.12%

FTSE 100 - Risers
Tullow Oil (TLW) 298.90p +6.29%
Hargreaves Lansdown (HL.) 1,179.00p +2.61%
Smiths Group (SMIN) 1,205.00p +2.21%
Centrica (CNA) 244.60p +2.21%
BG Group (BG.) 840.00p +2.19%
Glencore (GLEN) 282.80p +2.13%
easyJet (EZJ) 1,770.00p +2.08%
BHP Billiton (BLT) 1,445.00p +2.05%
Royal Dutch Shell 'B' (RDSB) 2,064.00p +1.90%
Royal Dutch Shell 'A' (RDSA) 1,970.00p +1.78%

FTSE 100 - Fallers
Antofagasta (ANTO) 691.00p -2.26%
CRH (CRH) 1,705.00p -1.50%
Wolseley (WOS) 4,116.00p -0.94%
Schroders (SDR) 3,239.00p -0.89%
Next (NXT) 7,490.00p -0.86%
ITV (ITV) 253.30p -0.78%
Tesco (TSCO) 239.50p -0.77%
International Consolidated Airlines Group SA (CDI) (IAG) 576.00p -0.69%
Royal Bank of Scotland Group (RBS) 349.30p -0.63%
British Land Co (BLND) 831.00p -0.60%

FTSE 250 - Risers
Lonmin (LMI) 123.60p +11.35%
Premier Oil (PMO) 127.90p +6.41%
Hunting (HTG) 453.90p +3.96%
Petrofac Ltd. (PFC) 850.50p +3.09%
Ophir Energy (OPHR) 120.30p +2.65%
Wood Group (John) (WG.) 621.00p +2.56%
Amec Foster Wheeler (AMFW) 904.00p +2.49%
Kaz Minerals (KAZ) 205.30p +2.45%
Just Eat (JE.) 372.20p +2.45%
Aveva Group (AVV) 1,505.00p +1.90%

FTSE 250 - Fallers
Afren (AFR) 3.35p -10.43%
Hikma Pharmaceuticals (HIK) 2,202.00p -2.70%
Carillion (CLLN) 338.50p -2.65%
Pace (PIC) 355.50p -1.85%
Betfair Group (BET) 2,195.00p -1.26%
Supergroup (SGP) 876.00p -1.24%
PZ Cussons (PZC) 326.50p -1.21%
esure Group (ESUR) 221.40p -1.16%
Genus (GNS) 1,348.00p -1.10%
Rightmove (RMV) 2,900.00p -1.02%