Britain's FTSE rises as United Utilities boosts sector

Wed Nov 27, 2013 7:03am EST

* FTSE 100 up 0.2 percent

* Utd Utilities rises after profit rise and dividend hike

* Share buyback lifts Compass Group

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

By Alistair Smout

LONDON, Nov 27 (Reuters) - Britain's benchmark equity index edged up on Wednesday, helped by gains in utility stocks after United Utilities posted higher interim profits and lifted its dividend.

A rise in the more defensive utility sector was complemented by appetite for more risk-sensitive stocks such as banks after German parties agreed a coalition deal two months after an election.

United Utilities moved on to the FTSE's leaderboard with a 1.5 percent gain after its profit rise, helping drag up rival utility stocks such as Centrica and National Grid .

United Utilities raised its interim dividend to 12.01 pence from 11.44 pence, highlighting the dividend appeal of utility stocks. According to Thomson Reuters StarMine data, the utility sector offers a dividend yield of 4.8 percent - above an average 3.3 percent yield for the FTSE 100 overall.

"It's a cash cow, and we've seen a lot of upgrades on United Utilities today. You might get a bit of regulatory pressure and bad press about the need to control prices though," said Joe Rundle, head of trading at ETX Capital.

"Despite that, there is upside on it and it will continue to go higher, and this is a good opportunity to buy the stock."

The top individual riser was catering and services company Compass Group, up 3.6 percent after launching a 500 million pound ($810 million) share buyback.

On the downside, engineer AMEC was the biggest FTSE faller, down 2.5 percent, with traders citing a report in the Times that it was eyeing a takeover of Foster Wheeler.

AMEC also went ex-dividend on Wednesday, meaning investors will no longer qualify for its latest dividend payout. This accounted for about half of 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," said Alastair McCaig, analyst at IG.

AMEC was the most heavily traded stock on the index, already having traded 100 percent of its 90-day average volume, compared with the overall index trading just a fifth of its average.

The blue-chip FTSE 100 index was up 0.2 percent, or 10.75 points, at 6,646.97 points at 1140 GMT.

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, ETX Capital's Rundle 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.

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