FTSE up as China package plan boosts commodities

A graph showing the performance of the FTSE 100 shares is seen through the spectacles of a computer user in Manchester, October 15, 2008.

LONDON (Reuters) - The FTSE 100 .FTSE rose 0.9 percent in a global equities rally on Monday, powered by mining stocks after China's almost $600 billion (382 billion pound) stimulus package plan boosted hopes of solid demand for commodities.

The share index .FTSE ended 38.96 points higher at 4,403.92 points, but way off its day's high of 4,524.87 points.

Metal prices surged after China approved 4 trillion yuan (373 billion pounds) in new government spending, and the G20 group of nations pledged to take all necessary steps to put financial markets back on their feet.

"The authorities are throwing everything they can at the situation," Graham Secker, UK equity strategist at Morgan Stanley in London, said of the global effort to prop up economies.

"We still think the market's reasonably positioned to go a bit higher. Things are still fairly fragile out there but money markets continue to improve in passing on some of the policy responses from the central banks," he added.

Miners topped the gainers, with Xstrata XTA.L, BHP Billiton (BLT.L) and Anglo American (AAL.L) leaping between 10.6 and 11.6 percent as copper and gold prices forged higher.

Firmer oil prices helped to lift the energy sector, with crude gaining following the news of China's stimulus package and Saudi Arabia's pledge to cut supplies to Asia in December.

BG Group (BG.L), BP (BP.L) and Royal Dutch Shell (RDSa.L) advanced between 0.9 and 1.9 percent.

British factory costs fell by a record 5.6 percent in October on falling oil prices. The figures are likely to boost expectations that headline inflation could fall from its current 5.2 percent in the coming months to below the Bank of England's 2 percent target.

U.S. and European shares broadly rose on Monday.

"As the mist clears it will become clear that investors should be in this market. They're going to get reasonable dividend yields and equities are fairly priced," Peter Dixon, an economist at Commerzbank, said of the UK equity market.

"But unfortunately it's going to take at least a couple of months before investors confidence is repaired after the pasting its taken."

BA JUMPS

British Airways BAY.L surged 7.5 percent after Royal Bank of Scotland upgraded its rating on the stock to "buy" from "sell." The broker also lifted its price target on the airline to 300 pence from 180 pence.

AstraZeneca (AZN.L) gained 3.2 percent after a study showed its cholesterol drug Crestor reduced deaths, heart attacks, strokes and artery-clearing procedures in apparently healthy patients and could prompt change to preventative care guidelines. Peer Shire (SHP.L) advanced 0.7 percent.

Shares in telecommunications firm Cable & Wireless CW.L gained 5.4 percent, after the company's underlying first-half core earnings beat analysts' forecasts and it raised its full-year outlook.

Shares in real estate firms weakened on a grim outlook for the British property sector and fears over a prolonged recession. British Land (BLND.L), Land Securities (LAND.L) and Liberty International LII.L fell between 2.3 and 3.4 percent.

Tesco (TSCO.L), the world's No. 3 retailer, fell 5.9 percent after it reported a dip in underlying sales in South Korea, its biggest market outside Britain.

Marks & Spencer (MKS.L) lost 1.7 percent and Next (NXT.L) shed 4 percent.

Banking stocks headed south, with Royal Bank of Scotland (RBS.L) off 4.7 percent and Barclays (BARC.L) down 1.7 percent.

HSBC (HSBA.L) lost 1.5 percent. Europe's biggest bank said pretax profit in the nine months to end of September was lower than a year ago, as bad loans in the U.S. climbed to $4.3 billion in the third quarter.

(Additional reporting by Harpreet Bhal; Editing by David Cowell)