Sector movers: Natural resources, airline stocks lead London higher

Mining, metal and airline stocks led the London market higher on Wednesday, as selected commodities futures staged a recovery supporting both the leading indices.

Just prior to the close, the FTSE 100 was trading 1.62% or 96.40 points higher at 6,032.24, while the FTSE 250 up 0.79% or 129.87 points at 16,659.85. Selected base metal futures fell further on the London Metal Exchange extending Monday’s declines on Chinese data.

A survey of the country's manufacturing sector indicated it is shrinking at the fastest pace for over six years. The preliminary Caixin China manufacturing purchasing managers' index (PMI) fell to 47 in September, below forecasts of 47.5 and down from 47.3 in August. A reading below 50 indicates contraction in the sector, while one above shows expansion.

Past the midway point of trading, LME’s three-month delivery contracts of primary aluminium (down 0.4%), copper (down 0.4%) and tin (down 0.1%) remained in negative territory. However, lead (up 0.6%), nickel (up 1.3%) and zinc (up 2.8%) futures rose in afternoon trading.

Traders largely shrugged off the negative data, helped in no small part by British Airways owner International Consolidated Airlines Group (IAG) which received a positive mention from Morgan Stanley.

The investment bank said IAG stands to gain from recent favourable developments in fuel prices, foreign exchange and as a result of the consolidation of Aer Lingus, turning it into Morgan Stanley’s ‘top overweight’ in the sector.

The combination of the above factors led Penelope Butcher and her team of analysts to raise their forecasts for operating earnings on an EBIT basis by 3% for 2015 and by a further 7% and 4.5% for the following two years. It sent IAG (up 4.76%) to the top of the FTSE 100 gainers list. Budget rival EasyJet (up 3.47%) also traded higher.

Glencore moved higher after Tuesday’s selloff, after Investec recommended traders to hold instead of sell. Midcap natural resources stocks also recovered with Petra Diamonds (up 8.85%), Premier Oil (up 6.13%) and Evraz (up 3.65%) among the FTSE 250 gainers.

However, oilfield services companies Hunting (down 5.13%) and Amec Foster Wheeler (down 1.44%) were firmly in negative territory.