UK top share index pauses near 9-month highs

Thu Dec 20, 2012 12:14pm EST

* FTSE 100 down 0.05 pct, near 9-month highs
    * Options expiry could see test of key 6,000 mark
    * Weir gains after acquisition

    By Toni Vorobyova
    LONDON, Dec 20 (Reuters) - Britain's top share index
steadied around nine-month highs on Thursday, pausing within
reach of the psychologically key 6,000 points mark.
    Investors were discouraged from pushing the market too much
higher by the lack of progress by U.S. politicians on a deal to
avoid a 'fiscal cliff' of planned tax hikes and spending cuts
that threatens the health of the world's biggest economy in
2013. 
    But many market players expect a compromise will be found
which, combined with traditional seasonal inflows from investors
taking the final chance to boost annual profits, could give the
stock market a fresh leg-up in coming sessions.
    The FTSE 100, which is up 1.7 percent so far this month, has
posted gains for the past nine Decembers. 
    "People are pretty much resigned to the fact that even if
this fiscal cliff agreement doesn't happen by the end of the
year, it will certainly happen by the end of January, but that
optimism is waning slightly," said Zeg Choudhry, head of
equities trading at Northland Capital Partners.
    The UK blue chip index closed down 0.05 percent or 3.3
points at 5,958.34, in sight of the 5,977.82 nine-month intraday
high set the previous session.
    Friday's expiry of December options could well galvanise the
market into trying the 6,000 level - last seen in July 2011 -
given the concentration of bets around that level.
    Open interest on the Liffe exchange as of Dec. 18 showed
some 30,713 call bets at the 6,000 mark - the heaviest
concentration of any of the December strikes and suggesting many
could be interested in seeing that level breached before expiry
in order to cash in.
    "We may well see 6,000 in front of the expiry tomorrow
morning," Choudhry said. "And if it doesn't happen tomorrow we
may well get there next week."
    From a technical view point, the FTSE still faces a few
hurdles en route to 6,000, namely the 2012 closing high of
5,965.58 - which it has tested in the past two sessions - and
this year's intraday peak of 5,989.07, both set in March.    
    "With each and every setback ending at higher levels than
the preceding ones the market keeps the upward pressure
intact," technical strategists at SEB said in a note.
    Low volumes added to the jittery trading, taking some
conviction out of the rally. Average daily volumes traded on the
FTSE so far this month are down by a third compared to the same
period last year, according to Reuters calculations.
    Engineer Weir Group added 2.8 percent as investors
cheered its acquisition of U.S. oil equipment firm Mathena as it
looks to increase exposure to the rapidly growing shale oil and
gas markets. 
    UBS said the acquisition could boost Weir's earnings by
about 5 percent, and potentially more. "The deal looks very
attractive if Weir have timed their purchase right," UBS
analysts said in a note.
    On the down side, shares in Carnival dropped 6.1
percent in afternoon trade, after it sounded a cautious note on
its 2013 outlook. The world's largest cruise operator said
advance bookings for 2013 continued to be below the prior year
levels, at slightly lower prices. 

 (Reporting by Toni Vorobyova; Editing by Ruth Pitchford)