By Alistair Smout and Sudip Kar-Gupta
LONDON (Reuters) – FTSE 100 turned higher in thin trade on Tuesday, as a strong start to trade on Wall Street helped lift mining stocks off their lows, including Glencore, which hit another all-time trough early in the day.
The blue-chip FTSE 100 index (.FTSE) closed up 0.9 percent higher at 6,137.60 points, turning higher as Wall Street gained following a climb in retail sales.
The move helped to reverse an early fall in mining stocks. The sector had been down as much as 4.2 percent, but recovered to trade 0.7 percent higher, helped as copper (CMCU3) bounced off a one-week low.
Mining and commodities trader Glencore (GLEN.L) slumped almost 8 percent early on after three leading global thermal coal price benchmarks fell below levels last seen during the global financial crisis of 2008-2009. It too recovered all of its losses.
“The fact they straddle so many different production spheres within commodities has meant they’re getting hit most days, and the sentiment towards them is weak,” Alastair McCaig, market analyst at IG, said.
Coal prices have been knocked by a sharp slowdown in demand, especially in Asia, and by stubbornly high mining output.
The FTSE hit a record high of 7,122.74 points in April but has since been hit by signs of an economic slowdown in China and the prospect of a Fed rate rise, with commodity stocks leading the falls.
The gains came in below-average volumes, with the FTSE 100 seeing 95 percent of its 90-day average volume traded.
Traders said volumes were likely to remain light before the most closely watched U.S. Federal Reserve meeting in years on Sept. 17. The Fed must decide whether to raise interest rates for the first time since 2006.
“The worst thing that they can do would be a ‘hawkish hold’. That is, if they don’t do anything, while saying that conditions are improving. That would…put us back to square one, and markets would remain very volatile,” said Ioan Smith, director at KCG Europe.
“They either need to surprise to the dovish side and rule out a hike in Q4 or they need to hike.”
A hike could put pressure on the Bank of England to follow suit. Higher rates often hurt stock markets by boosting the appeal of bonds and cash, where returns have been hit by the record low interest rates set by major world central banks since the 2008 global financial crisis.
But tightening by the Bank of England was seen as less likely after British annual inflation fell back to zero in August, ensuring price growth remained far slower than the central bank’s target.
In other stock movers, home improvements retailer Kingfisher (KGF.L) retreated 2.5 percent after a fall in first-half adjusted pre-tax profits.
However, chip designer ARM (ARM.L) rose 3.4 percent after it said trading was in line with expectations.
(Editing by Dominic Evans)