FTSE steadies, weak corporate earnings weigh

Thu Apr 25, 2013 7:21am EDT

* FTSE 100 trades flat

* AstraZeneca, Unilever down on Q1 sales misses

* Miners firm, helped by metals prices pick-up

By Tricia Wright

LONDON, April 25 (Reuters) - Britain's top share index traded flat on Thursday, steadying after recent robust gains, with falls in stocks such as AstraZeneca and Unilever on weak corporate earnings pegging the market back.

The UK benchmark was little changed after data showing Britain's economy grew faster than expected in the first three months of the year. Traders said the muted reaction was unsurprising because a large proportion of UK blue chips generate revenues overseas.

The FTSE 100 was up 0.39 point at 6,432.15 by 1102 GMT, having lurched 2.4 percent higher in the previous two sessions, pushing it back above its 50-day moving average - currently at 6,380 - and just 1.6 percent away from the year's high.

Traders said that expectations the European Central Bank could cut interest rates, fuelled by weak data from Germany this week, along with the fact that equities look attractive in a low interest environment, would keep a floor under markets.

"After technically looking very weak a week ago the FTSE is now back at the top end of the trading range. Economic fundamentals remain less important in the continuous search for yield," said Lex van Dam, hedge fund manager at Hampstead Capital, which manages around $500 million in assets.

GFT Markets technical analyst Fawad Razaqzada noted that the UK benchmark remains on course to make a run towards 2007 highs, at 6,754, although this could take some time to play out.

He said that near term, the index will find some resistance around 6,475/80, a resistance area in the past, while near-term support is likely to come in at 6,345/50, followed by 6,210/15.

Downbeat earnings weighed on the market on Thursday, with drugmaker AstraZeneca off 2.6 percent, leading the decliners after its sales dropped by a bigger-than-expected 13 percent in the first quarter as patent expiries took a heavy toll.

Consumer goods firm Unilever, meanwhile, was left nursing a 1.7 percent drop after its sales growth undershot market estimates.

Some analysts, however, chose not to take a hard line on the stock, whose shares have jumped around 18 percent in 2013 against a near 9 percent rise on the FTSE 100 in the same period.

"In all, and in the wake of a recent re-rating... little room for disappointment existed," Keith Bowman, equity analyst at Hargreaves Lansdown, said in a note.

"In a yield-starved highly uncertain economic environment, investors may continue to conclude that there are few alternatives... Favourable analyst opinion (is) unlikely to take a material turn for the worse."

According to Thomson Reuters StarMine data, the mean analyst recommendation for Unilever prior to Thursday's results was a strong "hold".

Miners whose steep slump earlier this year means investors are increasingly seeing value - helped keep the FTSE 100 buoyant, cheered by hopes of further economic stimulus and also by a pick-up in copper and gold prices.

The sector is trading at just 10.7 times its expected earnings for this year, according to Thomson Reuters StarMine data, significantly below the 12.1 times average for the FTSE. (Reporting by Tricia Wright, additional reporting by Toni Vorobyova; Editing by Hugh Lawson)

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