UK FTSE edges lower in thin, nervous trade

Tue Dec 10, 2013 11:21am EST

* FTSE 100 falls 0.3 pct at 6,537.77 pts

* Low trading volume exacerbates late selloff on tapering worries

* Tui hit by profit takers after results

By Francesco Canepa

LONDON, Dec 10 (Reuters) - Britain's main share index edged lower in thin, choppy trade on Tuesday, led by a late selloff in travel operator Tui Travel and hit by concerns about a reduction of U.S. monetary stimulus.

The FTSE 100 turned lower in late trade as U.S. stocks retreated from recent highs, showing investors' reluctance to put money back into the market until there is greater clarity on the Federal Reserve's equity-friendly asset-purchase programme.

Several Fed members have backed the scaling back of the scheme, which has helped the FTSE rise 16 percent since it was announced in September 2012, as soon as next week's meeting.

St. Louis Federal Reserve Bank President James Bullard, who is sometimes seen as a bellwether for U.S. monetary policy, unexpectedly voiced support for a "small taper". Two of his colleagues, meanwhile, said the risks of continued super-easy monetary policy exceed the benefits.

The FTSE 100 was down 21.71 points, or 0.3 percent, at 6,537.77 points by 1609 GMT after hitting an intra-day high of 6,571.91 and a low of 6,519.00.

Volume on the index was 40 percent lower than its average for the past three months, exacerbating share price moves.

The index was supported by a cluster of trendlines and Fibonacci retracements just below a nearly two-month low of 6,479 points hit last week.

"We're seeing some very choppy trading and that shows people are not in the market right now," Joshua Raymond, a strategist at City Index, said.

"My honest sense is people are still wanting to buy back into this markets but...they need to see greater confidence that tapering is not going to happen until the end of the first quarter."

Tui Travel was among the top FTSE fallers despite reporting strong results, as investors took profit on a nearly 11 percent rally in the share since late November.

The stock reversed early gains to trade 1.6 percent lower at 377.8 pence.

"People bought into it in the opening auction but as soon as it got to 396-397 pence we had sell orders from people looking to lock in their profits," said City Index's Raymond, adding he expected the stock to head back up towards its all-time high at around 400 pence.

A rally in insurer Prudential, up 2 percent, helped the FTSE limit losses after the British-based life group set new growth objectives, driven by its Asian business.

"The market is fairly confident with (chief executive) Tidjane Thiam achieving future targets as well as generating a decent amount of cash from his operations," Manoj Ladwa, head of trading at TJM Partners, said.

"The underlying fundamentals seem to be in place for a sustained upward move," he added, expecting the shares to hit 1,500 pence over the next 12 months.

Investors also welcomed news that Lloyds Banking Group boosted its capital by 680 million pounds ($1.11 billion) from the sale of its remaining 21 percent stake in wealth manager St James's Place, while speculation about a takeover approach boosted valve-maker Weir Group.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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