By Kit Rees
LONDON (Reuters) - UK shares inched higher on Monday as gains in the pharmaceutical sector and in grocer Sainsbury's outweighed a fall in mining stocks, which tracked metals prices lower.
After a subdued start to the session, the UK's FTSE 100 index (FTSE) was up 0.1 percent at 0926 GMT, broadly in line with the wider European market.
Britain's second biggest grocer Sainsbury's (L:SBRY) was among the top gainers, up 1.6 percent after it was given a clear run to buy Argos-owner Home Retail (L:HOME) for 1.4 billion pounds ($2 billion) after the market closed last Friday.
Steinhoff International (DE:SNHG), Sainsbury's rival in the bid for the takeover, has pulled out of the race.
"There will be much less upside surprise for the company with Argos in tow down the line. What still remains unclear to us though is the trajectory of underlying Argos profitability, and this will be an important variable over time," Clive Black, head of research at Shore Capital, said in a note.
Shares in Sainsbury's were also boosted by a price target upgrade from broker Nomura. Shares in Home retail gained 1.8 percent.
British retailers Next (L:NXT) and grocer Marks and Spencer (L:MKS) both fell, however, after investment bank UBS cuts its target price on the stocks.
The strongest gainer on the FTSE 100 was pharmaceutical company Shire (L:SHP) which rose 2.5 percent.
"We've seen a plethora of different broker upgrades on (Shire) over the last number of weeks ... I think it's the fact that it has had a very decent Q4," said Brenda Kelly, head analyst at London Capital Group. The company's announcement of a dividend also cheered investors, she added.
Shares in fellow drugmakers Hikma (L:HIK) and GlaxoSmithKline (L:GSK) advanced 1.6 percent and 0.4 percent respectively.
Among top fallers, a stronger dollar hit shares in British mining stocks as dollar-priced crude oil and metals became more expensive for holders of other currencies.
The price of copper dropped from a four-month high reached in the previous session as the dollar rebounded from lows hit after the Federal Reserve kept rates on hold last week. [MET/L]
The British mining index (FTNMX1770) fell 1.8 percent, led lower by Anglo American (L:AAL), Glencore (L:GLEN), Antofagasta (L:ANTO), BHP Billiton (L:BLT) and Rio Tinto (L:RIO), which were all down between 1.3 percent and 3 percent.
The sector is still holding on to gains for the year, up 23.5 percent since the beginning of 2016.
"Unless we see global growth starting to expand and the need for basic resources actually starting to expand more, then we could be looking at a temporary bottom," London Capital Group's Kelly said.
ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development). In a real-time, multimedia format from 0600 London time through to the 1630 closing bell, it will include the best of our market reporting, Stocks Buzz service, Eikon graphics, Reuters pictures, eye-catching research and market zeitgeist. Breaking news and dramatic market moves will continue to be alerted to all clients and we will continue to provide a short opening story and comprehensive closing reports.
If you have any thoughts, suggestions or feedback on this, please email mike.dolan@thomsonreuters.com.
Mike Dolan, Markets Editor EMEA.