FTSE 100 rides on energy, miners boost; Direct Line weighs on midcaps

The blue-chip FTSE 100 index rose on Friday led by heavyweight oil and miner stocks, although a drop in insurer Direct Line’s shares pressured midcaps, ahead of a highly anticipated U.S. jobs reading.

The FTSE 100 index rose 0.5%, while the midcap FTSE 250 index dipped 0.1%. Both indexes were set for their biggest weekly gains in six weeks.

Oil and gas stocks rose 1.9% and industrial metal miners added 0.8%, tracking optimism around China’s upbeat economic readings and efforts to shore up investor sentiment.

A private survey showed China’s factory activity surprisingly returned to expansion in August. The country’s central bank said it would cut the amount of foreign exchange that financial institutions must hold as reserves for the first time this year.

“The FTSE 100 has opened slightly higher…as broader optimism about what data from across the pond will say sets in,” said Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown (LON:HRGV), adding that China has taken a more aggressive approach to stimulate its economy.

Investors are now awaiting an August jobs report from the U.S., which will help gauge the Federal Reserve’s interest rate trajectory.

UK shares have underperformed broader European peers this year due to their heavy weightage of commodity-linked stocks that have lagged amid China’s lacklustre recovery and the Bank of England’s tough stance on inflation.

Direct Line fell 1.4% after it agreed to review overcharging of existing home and motor customers totalling about 30 million pounds ($38 million) for policy renewals.

Renishaw (LON:RSW) fell 3% to the bottom of the midcap index after Jefferies cut its price target on the engineering company.

Johnson Matthey (LON:JMAT) jumped 14.0% to the top of the FTSE 100, after the investment arm of New York-based industrial firm Standard Industries doubled its stake in the autocatalyst maker to 10%.

The chemicals index jumped 3.4%.