FTSE energised by mining bid moves

London equities made strong gains on Friday, as fresh bid activity energerised the mining sector.

The FTSE 100 started the session 1.2 per cent or 76 points higher at 5,956.3 building on the late rally that took the index 42 points higher on Thursday.

Rio Tinto rose 9 per cent to £54.20 after Chalco of China joined forces with US aluminium smelter Alcoa and took a 12 per cent stake in the miner ahead of the February 6 deadline for a full bid from peer BHP Billiton (NYSE:BHP).

The new consortium, called Shining Prospect, it reported to have paid £60 per share for the stake, above Rio's year-high of £59.30.

It said it did not intend to make a full offer for Rio at the moment, but reserved the right to do so in future. It also said it could participate in another bid for the company.

That helped shares in Rio's existing suitor BHP Billiton to a 7.7 per cent rise at £15.91. BHP has until next Wednesday to lodge an offer for Rio after its initial overtures were rebuffed by Rio's board.

The news re-stoked hopes for a round of consolidation in the heavily-weighted sector and sent its constituents racing higher.

Anglo American was 7 per cent stronger at £29.44 and Antofagasta rose 4.6 per cent to 682½p. Kazakhmys made gains of 4.5 per cent to £12.70 and Vedanta Resources put on 3.2 per cent to £18.58. Xstrata was 1.3 per cent stronger at £38.77. Lonmin was 2.7 per cent ahead at £29.69.

A strong overnight showing on Wall Street indices helped fund management stocks recover. Schroders was 2.4 per cent higher at £10.00 and Man Group was 1.2 per cent stronger at 553p.

New York's Dow Jones Industrial Average closed 1.7 per cent higher at 12,650.4 as sentiment in the financial sector improved on returning hope that bond insurer MBIA might retain its triple A credit rating.