UK stocks steady after good run but resistance at 5,800
LONDON Sept 10 — Britain’s top share index was steady early today as investors looked to the euro zone and a US Federal Reserve meeting later this week for more moves to stimulate the global economy.
At 1033 GMT (633pm local time), the FTSE 100 was down 0.35 point at 5,794.45, off 0.01 per cent, after an early rally that topped the psychologically important 5,800 level before stalling.
“There does still seem to be an air of optimism around, particularly regarding Europe. While the economy is far from out of the woods yet, it seems the chances of lurching into another sovereign debt crisis have been greatly reduced,” said David Jones, chief market strategist at IG Index.
The FTSE 100 index hit a 13-month high on Friday following fresh pledges last Thursday from the European Central Bank (ECB) for a government bond-buying programme to help fix the euro zone debt crisis.
Several political hurdles to this remain, notably a German court ruling this Wednesday on the euro zone’s European Stability Mechanism (ESM) programme, although most analysts expect this to be passed.
“While it has become apparent that traders are still happy to pick up stocks on the dips they are still reluctant to take them through resistance and there is little in the chart to suggest that that mind-set is about to change,” noted Bill McNamara, technical analyst at Charles Stanley.
Food producers, brewers and other defensive stocks dominated the fallers board as investors switched to more risk-sensitive cyclical stocks, notably miners, on expectations that last week’s moves by the ECB will help the global economy.
Brewer SABMiller was the biggest blue chip faller, down 2.1 per cent, while consumer products firm Unilever shed 1.6 per cent.
Associated British Foods fell 2.1 per cent as a strong trading update from the owner of the Primark clothing retailer was discounted after a strong run.
“We believe our estimates are supported by today’s update However, we consider that this performance is already reflected in consensus expectations and valuations, such that we do not expect a significant stock reaction,” Bernstein Research said in a note, repeating its “market-perform” rating on AB Foods.
Miners underpin
Miners were the top performers, tracking firmer copper prices as expectations built for further stimulus measures from central banks after weak trade data from China, the world’s top metals consumer.
A disappointing US jobs report last Friday was also seen supporting action from the Fed.
UBS said it expects a third round of quantitative easing when the FOMC concludes a two-day meeting on Thursday, which would trigger capital flows to emerging markets and potentially push miners towards the top of their valuation ranges.
UBS raised a number of price targets in mining; upgrading Kazakhmys to “buy” from “sell”. Kazakhmys shares gained 4.0 per cent.
The sector was also in the spotlight after commodities trader Glencore tabled a raised US$36 billion (RM111 billion) all-share bid for miner Xstrata, warning it would not improve the terms again after making concessions to recalcitrant shareholders.
Xstrata was up 2.4 per cent and Glencore down 1.2 per cent. — Reuters
