Drop in HSBC and Experian hinders UK's FTSE

Wed May 7, 2014 12:34pm EDT

* FTSE 100 closes flat at 6,796.44 points
    * HSBC takes most points off index after profits fall
    * Cautious outlook hits Experian's shares
    * Trend still to buy dips in FTSE - InterTrader's Ruffley

    By Sudip Kar-Gupta
    LONDON, May 7 (Reuters) - Britain's top equity index made
little progress on Wednesday, as a fall in the shares of HSBC
bank and credit data firm Experian added to signs of weak
corporate earnings that have stalled the market's rally.
    The blue-chip FTSE 100 index closed down by 2.12
points - flat in percentage terms - at 6,796.44 points. The
index reached a two-month closing high last Friday after five
straight days of gains but has since stalled after that move up.
    A 1.3 percent fall at HSBC took the most points off
the FTSE. The bank recorded a 20 percent drop in first-quarter
profits and said customer activity was muted in April.
 
    Investec analyst Ian Gordon said he preferred rival bank
Standard Chartered to HSBC and that HSBC's return on
equity could remain under pressure in the coming years.
    "We see no easy way out and expect RoE to remain sub-10
percent until 2017," said Gordon, who kept a "hold" rating on
HSBC's shares.
    Experian was the worst-performing FTSE stock in
percentage terms, sliding 6.5 percent after Chief Executive Don
Robert said growth in the first half of this year could be
constrained. 
    The FTSE hit a peak of 6,867.42 points in late January,
which was close to its highest level since early 2000. It has
since fallen back amid concerns about a slump in emerging
markets and mounting unease about clashes in Ukraine between
Kiev authorities and pro-Moscow militants.
    The FTSE is trading on a 12-month forward price/earnings
ratio of about 13 times, against its five-year average of 11,
Thomson Reuters Datastream shows. Meanwhile, analysts have been
steadily lowering profit forecasts since the start of 2014.
    Steve Ruffley, chief market strategist at InterTrader, said
now could be a good time to book profits on last week's run-up
in the FTSE, but added investors were still buying up shares on
days when the FTSE fell which should support the market.
    "As we have not yet reached the psychological 7,000 mark in
the FTSE, there are options for profit taking to take place at
any point," said Ruffley. 
    "But the fact remains that any significant drop has been
bought back up, almost immediately. I predict that there may be
a small doubt as to the bullish capability of May but any
significant dips will continue to be bought back up," he added.

 (additional reporting by Tricia Wright; Editing by Larry King)
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