Fed hopes lead UK shares to fresh nine-month high

Wed Dec 12, 2012 6:33am EST

* FTSE 100 index up 0.2 percent
    * Energy and materials benefit from improved risk sentiment
    * Substantial resistance seen before any rise to 6,000

    By Alistair Smout
    LONDON, Dec 12 (Reuters) - Britain's top share index gained
on Wednesday as hopes that the U.S. Federal Reserve would
continue to provide stimulus for the world's biggest economy
lent support to risky sectors.
    Energy and basic materials, which rise and fall with
optimism over the economic outlook, led the FTSE 100 up
as the Fed was expected to launch a fresh round of bond buying
to the sum of $45 billion a month. 
    At 1123 GMT, the FTSE 100 index was up 12.47 points,
or 0.2 percent at 5,937.44, having hit a fresh nine-month high
at 5,941.89.
    The rise took gains for December to 1.2 percent less than
halfway through the month, despite recent downgrades to growth
outlooks across the UK and the euro zone.
    "We have seen a continual rally over the last few weeks that
seems to discount the prospect of any bad news," said Atif
Latif, Director of Trading at Guardian Stockbrokers.
    "Geopolitical and macro concerns have taken secondary
importance and aggressive buying into the year-end seems to be
following historical patterns for December trading." 
    A rise in December would be the 10th straight year of gains
in the last month of the year.
    "We also look towards the FOMC and much faith has been
placed into their ability to continue asset buying," Latif
added. 
    The energy sector added 5 points to the index as oil 
rose to above $108 a barrel, with investors anticipating renewed
monetary stimulus. 
    The materials sector also prospered, with miner Anglo
American among the FTSE 100 leaders, ahead by 1.8
percent as it was lifted by a Barclays upgrade to equal weight
from underweight.
    The bank highlighted a 30 percent underperformance by the
miner's stock versus peers BHP Billiton and Rio Tinto
.
    "Given the numerous levers that can be pulled, and the fact
the big diversified miners don't tend to underperform by more
than 30 percent in any given period, we feel the risk/reward is
turning less negative," Barclays said in a note.
    
    VIVE LA RESISTANCE
    The index's inability to sustain its session peak
highlighted the significant resistance that the FTSE 100 faces.
While it broke above 5,932, the intraday high in September,
other key levels need to be passed before it can hit 6,000.
    "There is the potential for plenty of resistance between
5,900 and 6,000 and the index might well need several attempts
to achieve the break higher," said Bill McNamara, technical
analyst at stockbrokers Charles Stanley.
    "The next key level is the March closing peak, at 5,965."   
 
    Also capping the index were ex-dividend factors, which
clipped 1.70 points off the FTSE 100 on Wednesday. Babcock
International, Polymetal, and Wolseley 
all traded without entitlement to their latest dividend payout.

 (Additional reporting by Jon Hopkins; Editing by Catherine
Evans)
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

A tourist takes a plunge as she swims at Ngapali Beach, a popular tourist site, in the Thandwe township of the Rakhine state, October 6, 2013. Picture taken October 6, 2013. REUTERS/Soe Zeya Tun (MYANMAR - Tags: SOCIETY) - RTR3FOI0

Where do you want to go?

We look at when to take trips, budget considerations and the popularity of multigenerational family travel.   Video