Britain's FTSE hits one-month high as Alcoa cheers miners

Tue Jul 9, 2013 7:11am EDT

* FTSE up 0.9 percent

* Gains push index towards short-term overbought territory

* Alcoa results boost mining shares

By Toni Vorobyova

LONDON, July 9 (Reuters) - Britain's blue chip share index touched a one-month high on Tuesday, backed by a fresh batch of strong domestic data and with heavyweight mining stocks cheered by forecast-beating results from U.S. peer Alcoa.

Alcoa Inc, which traditionally kicks off the global earnings season, posted a larger-than-expected adjusted profit for the second quarter on Monday and forecast growing aluminium demand.

That offered some much-needed good news for miners - the third biggest sector in Britain's FTSE 100 and by far the laggard this year due to falling metals prices and concerns about the strength of global demand.

Miners added 10.8 points to the FTSE 100, which was up 57.31 points, or 0.9 percent, at 6,507.38 at 1044 GMT. Earlier it hit its highest intra-day level in a month at 6,530.86.

"We've got a risk-on theme with Alcoa's better-than-expected profits ... Various investment funds have now upgraded their price targets for the FTSE and you are seeing people reallocating assets into equities, they are definitely very popular at the moment," said Jordan Hiscott, trader at Gekko Global Markets.

He forecast that the FTSE could rise another 4 percent to around 6,750 points by the end of next week.

The index has gained 8 percent in the past fortnight, thanks in part to the Bank of England's pledge of continued low interest rates as well as better domestic data, factors which have prompted Goldman Sachs among others to recommend long bets on British blue chips.

Financial stocks held up well, with investors snapping up the likes of fund manager Aberdeen Asset Management, which are likely to benefit from further gains in equities.

Domestic data continued to be supportive, with strong numbers on UK house prices, retail sales and business confidence. A bigger-than-expected drop in manufacturing activity, however, added some caution. {ID:nL6N0FE3J0]

On technical charts, equities' recent strong gains have pushed the index to the edge of overbought territory on the seven-day relative strength indicator (RSI) although last time it got there, in May, the FTSE continued to rally for another three weeks.

"We are slight overbought in the short term but that doesn't mean we can't go any higher. The breadth of the market is very good and I think we are going to stay in the upward trend, between 6,400 and 6,600 for the summer," said Bill Rook, investment manager at Redmayne Bentley. (Editing by Susan Fenton)

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