FTSE 100 extends rebound on view Fed to pump out cash for longer
* FTSE 100 up 3.99 points at 6,626.57
* Traders eye 6,700 level in the near-term
* G4S gains on cash-solutions business bid speculation
* RBS falls as Telegraph reports Osborne mulling break-up
By David Brett
LONDON, Oct 21 (Reuters) - Britain's top share index edged up early on Monday, gaining for the eighth straight session, on the prospect of the U.S. Federal Reserve pumping out cash for longer to support the economy.
London's blue chip index rose 3.99 points or 0.1 percent to 6,626.57 by 0726 GMT.
The FTSE 100 is up around 4.5 percent in the last seven days, after hitting its lowest levels since July, with expectations that the Fed will keep its stimulus in place following the U.S. fiscal standoff supporting demand.
"Expectations are that quantitative easing will now remain in place for longer than anticipated (given the short-term nature of the debt deal in the United States) ... So we could see the FTSE testing the 6700 level before any pullback. But overall we are looking for upside into year-end," Jawaid Afsar, sales trader at SecurEquity said.
Fund flow data backed up Afsar's assertion that equity-friendly QE would continue to support the asset class.
Equity Funds posted their biggest weekly inflow since mid-third-quarter 2011, according to the latest EPFR data.
With the threat of a U.S. default postponed for a few months, investors will now focus on earnings and fundamentals, traders said.
European companies have enjoyed a bullish start to the third-quarter earnings season, with 63 percent of the corporates that have reported so far beating analysts' expectations.
But analysts are still cutting their forecasts for company earnings. For the firms that have reported so far, analysts have cut their fourth-quarter outlooks by an average of 4.2 percent, which could reduce the momentum in equities.
"2013 EPS forecasts have nudged lower recently, but as far as the results season is concerned, the most important themes will be geographical divergence," UBS said in a note.
In its view, the sectors most at risk are those with relatively high valuations and at the same time also suffering a loss in earnings momentum, which include beverages and food producers, where the emerging market exposure has acted as an important headwind.
Top gainer on Monday on the FTSE 100 was G4S, rising 2.5 percent after Bloomberg reported over the weekend that the British private equity group Charterhouse Capital Partners was mulling making a 1 billion pound ($1.6 billion) offer for G4S's cash-solutions business.
Royal Bank of Scotland was the top faller, down 3 percent as uncertainty lingered over the future make-up of the part state-owned UK lender. The Daily Telegraph reported on Friday that British finance minister George Osborne said his ministry was actively looking at breaking up the bank. (Editing by Hugh Lawson)