Leading share index was slightly higher on Friday, buoyed by early gains in the mining sector but limping towards the second quarter after a March downturn that looks set to tarnish an otherwise solid first quarter.

The FTSE 100 <.FTSE> index of leading blue-chip shares was up 0.6 percent, or 35.2 points, at 5,777.25 around midday, on course for a fall of 1.6 percent in March after gains in each of the previous three months.

As it stands, the index should still chalk up a quarterly gain of just over 3.5 percent, which would mark a roughly two-thirds recovery of last year's slide.

With questionmarks remaining over the state of the global economic recovery and political pitfalls facing Europe in its attempt to build a financial firewall around the debt crisis, the outlook for the second quarter is cautious.

This six month equity rally has been fairly indiscriminate, with virtually all sectors rising; investors will probably need to be far more circumspect in their choice of investments over the next quarter to generate similar returns, Rebecca O'Keeffe, Head of Investment at Interactive Investor, said.

Higher metals prices helped mining issues to add around half the index's early points total, led by heavyweights Rio Tinto , up 3 percent, and BHP Billiton , up 2.6 percent.

The biggest gainers in the sector, however, were Kazakhmys , Antofagasta and Vedanta , all up more than 3.5 percent.

A strong start to the year for the mining sector as a whole gave way to a tepid February and poor March, with all three firms posting monthly double-digit declines as quarter-end approaches.

Copper's up and the miners are enjoying a bounce, a London-based trader said. The industrial metal was up 0.5 percent in late morning trade, while zinc and nickel also rose.

Credit Suisse, in a note to clients, said it saw opportunities in spite of the recent mining sector falls.

The new year optimism has evaporated with the sector back to early Jan levels. It is now broadly accepted among investors that sector returns will decline over time and Chinese structural demand growth has slowed.

Despite this, cycle points will continue to open up opportunities; we expect an improving demand outlook and rising commodity prices in 2012 and the disconnect between the equities and commodities and implied returns fade has over-shot on the downside, they wrote.

The bank advised buying into stocks with good assets, strong growth and an ability to raise cash, such as Rio Tinto and BHP Billiton , among others, but said it was cautious on those with weak growth or free cash flow and expensive valuations, such as Anglo American and Kazakhmys, among others.

The current market prices of Kazakhmys and BHP Billiton imply among the most bearish earnings scenarios in the sector, as both have an implied earnings per share compound annual growth rate of around minus 14 percent over the next five years, Thomson Reuters StarMine data to the Thursday close showed.


As cyclical stocks enjoyed a bounce, stocks in sectors with more defensive qualities, such as utilities and telecoms, all took a hit, with Vodafone the biggest faller, down 1.6 percent.

Fellow defensive Tate & Lyle , which makes sweeteners and starches, was initially one of the worst hit before recovering to trade up 0.6 percent after a releasing a solid trading statement.

It was not enough for several brokerages, however, and Investec moved to reiterate its sell rating and 695 pence price target on the stock.

Yesterday we had been anticipating a steady, reassuringly dull, update and today we seem to have got one. The Q4 reads like a copy and paste of the Q3: good corn sweetener volumes in the US, rising margins in Europe but Sucralose weaker than the H1, the broker wrote.

The question for Tate remains the one of whether the implied slowing growth in H2 (and FY13?) is enough to keep the stock interesting for its new fan-base.

The long-term case for defensives remained, however, investment bank Citigroup said in a strategy note.

Over the last 30 years, defensives have structurally outperformed. Two steps forward in bear markets, one step back in the good times.

(Additional reporting by Jon Hopkins and Francesco Canepa; Editing by Andrew Callus)