UPDATE 1-Britain's FTSE rises as Germany agrees governing coalition

Wed Nov 27, 2013 11:46am EST

* FTSE 100 up 0.2 percent, volume muted

* German tail-risk disappears as parties agree deal

* AMEC hit by M&A report, ex-dividend

By Alistair Smout

LONDON, Nov 27 (Reuters) - Britain's benchmark equity index edged up on Wednesday, supported by a deal over a new German government that boosted appetite for more risk-sensitive stocks such as banks.

German parties agreed a coalition deal two months after an election. While the deal was welcomed by the market, the reaction was in muted volume, with just 90 percent the 90-day average volume traded.

"People can't see any significant news flow that could be a banana skin in the next month or so ... so we could carry on drifting higher into the year end," Andy Ash, head of sales at Monument Securities, said.

The FTSE 100 extended gains after U.S. data came in above expectations in afternoon trade, ahead of the market shutdown for the U.S. Thanksgiving holiday on Thursday.

Financials added the most points to the blue-chip FTSE 100 index, which was up 0.2 percent, or 13.25 points, at 6,649.47 points at the close.

On the downside, engineer AMEC was the biggest FTSE faller, down 3.9 percent, with traders citing a report in the Times that it was eyeing a takeover of Foster Wheeler.

A source close to the matter said AMEC was looking at its Swiss-based rival among a number of potential acquisition targets, but was not in talks with the company. AMEC itself did not comment. Foster Wheeler were not available for comment.

AMEC also went ex-dividend on Wednesday, meaning investors will no longer qualify for its latest dividend payout, which accounted for around a third its fall.

"We've seen more activity than normal in AMEC ... When you get involved in high-cost takeovers, the market expects to see synergies and savings, but in the short term it's natural to see some nervousness," Alastair McCaig, analyst at IG, said.

AMEC was heavily traded in volume of 194 percent of its 90-day average.

The index is up by around 13 percent since the start of 2013. While it has flatlined in November, charts supported the view that it could resume its rally between now and the end of the year.

The FTSE 100 bounced off of its 40-day moving average when it rose at the open, and a cluster of support from moving averages around the 6,600 level painted a supportive technical picture for the index, Joe Rundle, head of trading at ETX Capital said.

Hartmann Capital trader Basil Petrides felt it could end 2013 at a record high of 7,000 points.

"We're still in a bull market cycle," he said.