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FTSE 100 set for lower start after rally, commodities rise

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The FTSE 100 is projected to start 12 points, or roughly 0.2% lower today to correct after yesterday’s surge, which saw the blue chip index gain over 1% on a resilient performance from banking and mining stocks and a strong day of trading on Wall Street.

The US stock market benefitted from two updates that came out yesterday. The Commerce Department said that income and spending rose by 0.4% and 0.2% in December, while the Institute for Supply Management later reported an increase in its manufacturing index to 58.4 in January, reaching its highest level in more than five years. Pending home sales update is due to be released today.

The Dow Jones Industrial Average gained 1.2%, while the broader S&P 500 index was up 1.4% and the technology heavy NASDAQ composite added 1.1%.

Most Asian markets were in bullish mode today. China’s Shanghai composite index rose 1%, Japan’s benchmark Nikkei 225 climbed 1.6%, South Korea’s KOSPI rose 0.5% and Australia’s S&P/ASX 200 advanced 1.5%. Hong Kong’s Hang Seng took a different path, sliding 0.2%.

Royal Bank of Scotland (LSE: RBS) emerged as the top riser yesterday, rallying 8% on reports of asset sale progress. Miners Vedanta Resources (LSE: VED) and Kazakhmys (LSE: KAZ) followed with gains of over 5%. Other notable risers included banks Barclays (LSE: BARC) and Lloyds (LSE: LLOY), which added 4% and 3% respectively, utility company Severn Trent (LSE: SVT) with a 4% climb and airline British Airways (LSE: BAY), which climbed 3.3% after Goldman Sachs raised its price target for the stock.

Just three FTSE 100 constituents lost more than 1%. Asset management firm Schroders (LSE: SDR) slid to the bottom of the pile with a loss of nearly 3%, while Imperial Tobacco Group (LSE: IMT) was down 1.5% and credit information group Experian (LSE: EXPN) both retreated 1.2%.

Commodities

Oil prices improved with March Brent Crude reaching US$73.26/barrel, while US light, sweet crude rose to US$74.63/barrel.

Precious metals also advanced. Gold returned to US$1,105/oz, while silver and platinum were at US$16.66/oz and US$1,541/oz respectively.

Base metals retreated with copper and nickel sliding to US$3.03/lb and US$8.14/lb as zinc was down to US$0.95/lb.

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