Investors still wary as stocks edge up

LONDON FTSE 100 CLOSE 6,016.98 +7.06

STRENGTH from commodity stocks helped the FTSE 100 index inch up to its highest close in six weeks yesterday, but trading was light and investors were sceptical about prospects for further gains in the short term.

The Footsie, which gained more than 100 points on Friday following an upbeat US unemployment report, added a further 7.06 points yesterday to close at 6,016.98.

But volumes were light, with the FTSE trading below 80 per cent of its average 90-day volume. Trading was thin for most trading sessions in March.

Some investors said this indicated gains made in recent sessions were fragile.

Charles Morris, a fund manager at HSBC, said: "If volume falls as prices rise, that it is not a setting for reliable price action."

The pound was up against the dollar and the euro after construction figures revealed that input prices rose to a 31-month high, increasing speculation that the Bank of England will raise interest rates. Sterling was at $1.61 against the doller and €1.13 against the single currency.

Higher commodity prices helped mining stocks make advances, with silver miner Fresnillo the session's second biggest riser, up 46p to 1,611p, while Eurasian Natural Resources added 8p to 965p.

They were joined on the risers board by a clutch of blue-chip retail stocks as the sector attempted to shrug off the dire updates of last week.

B&Q-owner Kingfisher, which recently delivered resilient trading figures, rose 4.7p to 258.5p while fashion chain Next added 46p to 2,046p and Tesco cheered 4.8p to 393.8p. But Dixons Retail, which warned over profits last week after worsening sales declines, dropped a further 0.7p to 12p in the FTSE 250 and Comet parent Kesa Electricals was 1.9p lower at 115.8p.

Among the Scottish stocks, Glasgow-based temporary power supplier Aggreko signed a deal to supply generators to the firm that runs the crippled Fukushima nuclear power plant

Aggreko closed 5.3 per cent or 84p higher at 1,678p after it announced will supply 200 megawatts of both gas and diesel-fired power to Tokyo Electric Power.

Dundee-based cash machine advertising firm I-Design closed up 29 per cent or 5.5p at 24.5p on Aim after reporting rising sales.

Banks were lower after a critical report from MPs on the sector over the weekend and ahead of the keenly awaited spring update from the Independent Commission on Banking due next week. Lloyds Banking Group was 0.7p lower at 60.3p, while HSBC dropped 7.5p to 647.6p and Barclays slipped 1.15p to 288.3p.

In an otherwise quiet day for corporate news, Vodafone shares - down 0.3p to 178.8p - were in the spotlight after its deal with Vivendi, which will mean Vodafone returns another 4 billion to shareholders by buying back shares.

Meanwhile, a stronger than expected Markit/CIPS survey on the construction sector helped sentiment after it emerged growth fell only slightly in March.With the sector finishing the first quarter of 2011 on the front foot, shares in housebuilder Taylor Wimpey were up 0.7p to 41.6p, while Barratt Developments lifted 2.8p at 115.5p and Persimmon gained 11.6p at 463.4p.