FTSE edges higher, Rolls-Royce up on likely engine deal

Fri Jun 27, 2014 4:20am EDT

* FTSE 100 index rises 0.3 percent

* Blue-chip index heads for weekly decline

* Rolls-Royce up on engine deal hopes

By Atul Prakash

LONDON, June 27 (Reuters) - Britain's top share index rose on Friday, with Rolls-Royce gaining on a Reuters report saying Airbus was very close to a decision to upgrade its A330 planes with the aero-engine maker as an exclusive supplier.

Rolls-Royce rose 1.8 percent to feature among the biggest gainers on the FTSE 100 index, which was up 0.26 percent at 6,752.29 points by 0755 GMT. However, the index was heading for a weekly drop after falling 1.5 percent this week.

Although the index rose on Friday, investors were reluctant to place big bets in the absence of new market catalysts and ahead of the second quarter earnings season. Violence in Iraq also dampened appetite for riskier assets.

"Investors continue to search for the next crucial market catalyst. Central bank action and geopolitical events remain high on the agenda," Hargreaves Lansdown analyst Keith Bowman said.

"Given the degree of uncertainty, a balanced diversified investment portfolio looks to remain important."

The FTSE 100 has slipped about 2 percent from its 14-year high in May and is now about 3 percent away from a record high set in late 1999. It slipped to a two-month low on Thursday before recovering to close flat.

"The UK index ended barely changed (on Thursday) and the worry here is that no big bounce has followed its drop to two-month lows, leaving it vulnerable to further near-term weakness," Charles Stanley analyst Bill McNamara said.

The index will find some support at its 100-day moving average at 6,725 points, while the next resistance is seen at 6,792 points, its 50-day moving average.

Analysts advised caution on the market near-term.

"We remain cautious on directional trends - not just in the UK but across global equity markets," Ian Richards, head of equity strategy at Exane BNP Paribas, said in a note.

"But there is a strong relative trade opportunity developing. After the acute, and almost ubiquitous, weakness of the last 3 months, we think investors should start building positions ahead of the rate hike." (Editing by Louise Ireland)