UK FTSE steadies after 5-day losing run as RSA, Glaxo rally

Wed Feb 5, 2014 11:27am EST

Related Topics

* FTSE 100 up 0.1 pct, to snap 5-day losing streak

* Glaxo boosts index after results

* RSA bounces after CEO appointment

* Financials mixed with Hargreaves Lansdown down 9.8 pct

By Francesco Canepa

LONDON, Feb 5 (Reuters) - Britain's top equity index steadied on Wednesday, breaking a five-day losing streak on the back of rallies in insurer RSA and pharma group GlaxoSmithKline.

Shares in RSA rose 3.9 percent on expectations its new chief executive Stephen Hester, credited with salvaging RBS, "would help turn around the insurer, which is struggling with a 200 million pound ($330 million) hole in its finances following an accounting scandal.

The stock had fallen 25 percent in the previous 12 months, lagging a 20 percent rally for the British insurance sector and leaving RSA trading at a discount to all its peers based on expected earnings and book value, Thomson Reuters data showed.

"Having someone on board of Stephen's calibre and track record is certainly supportive," said Marcus P Rivaldi, an analyst at Morgan Stanley, who expected the stock to start outperforming its peers.

"The key thing is having the balance sheet issue put to bed fairly rapidly ... and then you have a capacity to see the stock normalising in terms of assumptions on multiples."

Analysts Barclays also welcomed the appointment, upgrading the stock to "equal weight" from "underweight".

Volume on RSA's shares was over four times its full-day average for the past three months, compared to FTSE 100 volume 10 percent below the index's own average.

The FTSE was up 5.20 points, or 0.1 percent, at 6,454.47 points, steadying after it shed nearly 2 percent in the previous five days.

Shares in GlaxoSmithKline, up 4.1 percent, added most points to the index after saying it predicts a pick-up in sales growth this year as productivity in its drug research labs improves and pressure on sales in China moderates following a damaging bribery scandal.

TOP FALLER

The FTSE repeatedly bounced back up after testing support at 6,422, showing buyers were starting to come back into the market as it approached four-month lows.

The recent falls in the FTSE have come as concerns over U.S. growth and monetary stimulus compound fears over the resilience of emerging market economies.

"Any move towards 6,400 is attracting some buying, (but) I'd want that area to hold for the week before I'd be sitting a little more comfortable on the long side," said Will Hedden, sales trader at IG.

"If you did well last year - which most equity investors did - then I don't see why you need to rush things at the moment."

The FTSE 100 gained 14.4 percent last year, although emerging market turmoil has seen it lose around 4 percent so far in 2014.

Traders said investors were unlikely to make large directional bets before Thursday's European Central Bank policy review, where the ECB will be under pressure to loosen policy, and U.S. jobs numbers on Friday, which will provide a clearer picture of the strength of the country's recovery.

A weaker-than-expected report on the U.S. private labour market cast a shadow ahead of Friday's release, causing the FTSE to trim gains in late trade.

Investment manager Hargreaves Lansdown, which dropped 9.8 percent, was the top FTSE faller as its quarterly update showed a fall in the company's interest margin. The stock is up over 110 percent since the beginning of 2013.

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