FTSE steadies, underpinned by commodities

By Atul Prakash

LONDON (Reuters) - Britain's top share index outperformed European shares on Wednesday, with a recovery in commodities prices underpinning basic resources and energy stocks.

The blue-chip FTSE 100 index (.FTSE) closed up 16.99 points, or 0.3 percent, at 6,285.21 points after gaining in the previous three sessions.

The commodity-heavy index outperformed a 0.8 percent fall on the euro zone blue-chip Euro STOXX 50 .

The UK mining index rose 2.9 percent, the top sectoral gainer, after copper prices climbed higher on a weaker dollar and top metals consumer China reported strong copper imports in May.

"Copper is a leading indicator for the industrial sector. From the data, we see demand is picking up in China and this translates into a more positive outlook for the commodity," said Naeem Aslam, chief market analyst at TF Global Markets.

"However, we need to see more positive numbers from China before investors can start supporting this uptrend."

Prices of other industrial metals such as aluminium and nickel also advanced, helping Glencore (GLEN.L), Anglo American (AAL.L) and Antofagasta (ANTO.L) to gain between 2.6 percent and 5 percent.

The energy index rose 2 percent after oil prices rallied for a third day to hit their highest in about eight months, boosted by industry data showing a larger than expected drawdown in U.S. inventories, worries about attacks on Nigeria's oil industry and strong Chinese demand for crude.

Among individual stocks, Sainsbury's (SBRY.L) showed choppy moves after Britain's second-biggest supermarket chain reported a drop in quarterly underlying sales and cautioned that it did not expect market conditions to improve any time soon.

Its sales did come in slightly better than analysts' average forecast. After giving up an early gain to turn negative, it closed back up by 1.6 percent.

However, many remained sceptical of the outlook for the grocer as it said it was prepared for an escalation of a recent price war with low-cost retailers.

"Things are still tough on the high street. Food price deflation is still depressing grocery sales and the discounters Aldi and Lidl are still nibbling at the big supermarkets' heels," said Hargreaves Lansdown analyst Laith Khalaf.

"Nothing will move the dial at Sainsbury more than the planned acquisition of Home Retail Group, the parent company of Argos ... But like Sainsbury, Argos has its own problems and the outcome of two challenged businesses joining forces still remains very uncertain."

The broader stock market was also underpinned by data showing British industrial output grew at its fastest for nearly four years in April, boosted by pharmaceuticals, car production and gas.

The data contrasted with other signs of a slowdown in the economy ahead of Britain's referendum on June 23 on whether to remain in the European Union or to leave.

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Mike Dolan, Markets Editor EMEA.

(Additional reporting by Alistair Smout; Editing by Tom Heneghan)