* FTSE up 0.3 percent
* Financial lead gainers
* Aviva, IAG boosted by broker upgrades
* Miners slip as China inflation stokes policy concerns
By David Brett
LONDON, Jan 11 London's blue chip index closed
marginally higher on Friday as demand for oil and financial
stocks kept it at multi-year highs, but an overshoot in China
inflation data weakened mining stocks.
Britain's top share index closed up 20.07 points, or
0.3 percent at 6,121.56, the highest since mid-2006,
consolidating Thursday's close above 6,100, but momentum appears
to be slowing with the index trading in a tight 60-point range
over the last week.
"The market has been trending up for some time. Some of the
smarter trend followers may be thinking of taking money off the
table because there are risks of reversals and macro concerns,"
Edward Pope Croft, CEO of Stockopedia, said.
Volatility - a crude gauge of investor fear -
recently climbed off five-year lows leaving strategists
questioning whether the market has become complacent, drawing
comparisons with February 2011 right before the market started a
"I would still buy (cheap) volatility (to protect against a
market correction). The fuse has been lit, the question is can
the hero get there in time?" Nick Xanders of European equity
strategy at brokerage BTIG said.
From a technical point of view the FTSE100 index is testing
resistance at the 2011 peaks with support from the uptrend line
Recent gains have been driven by cyclicals and financials as
the threats to the global economy - the euro zone debt crisis
and the U.S. fiscal issues - appear to have subsided.
"In the first quarter we still think cyclical and financials
will do better than defensives, it may reverse after that but
for the first few months we would expect last year's trend to
continue," Adrian van Tiggelen, senior strategist at ING
Investment Management, said.
Banks kept pushing higher with the sector a
favourite among investors gaining 45 percent since central banks
stepped in to backstop the financial system and more recently
the relaxation in liquidity rules from Basel.
Insurers, which remain cheap on valuation grounds,
trading on just 8.8 times 12-month forward price-to-earnings
compared with the FTSE 100 on 11.2 times, rose too.
Aviva led the sector higher, up 3.3 percent after
Citigroup to "buy" from "neutral" on valuation grounds.
A boost from a broker also sent British Airways owner
International Consolidated Airlines up 5.4 percent, the
top individual riser on the FTSE 100.
UBS upgraded the stock to "buy" on increased optimism over
the outcome of a restructuring at Iberia and valuation grounds.
A fall in the miners' index kept a lid on
gains. The sector shed 1 percent after China revealed inflation
had risen to a seven-month high.
"Investors fear that this could discourage further (policy)
easing from Beijing, which could in turn hamper growth
prospects," Fawad Razaqzada, Market Strategist at GFT Markets,
Concerns over near-term forecasts pushed Oil Explorer Tullow
Oil down 3.2 percent, the top faller on the FTSE 100 in
strong volume - 280 percent of 90-day daily average - after its
Gold miner Centamin, however, bucked the trend and
ended the week up 41 percent with traders citing an interview on
Egyptian television in which the country's petroleum minister
supported the company.
The stock enjoyed a bullish week after gold exports from
Egypt resumed and the company posted annual production which
came in 5 percent ahead of guidance.
But some analysts are questioning whether the FTSE 100 can
keep rallying after gains in seven out of the past eight weeks
and a 16 percent rise since June.
"Bulls can content themselves with the fact that markets
have held on to the healthy gains of the previous week and point
to increasing investor flows into risky assets. Bears can point
to the apparent loss of market momentum and that the big issues
of the day haven't been addressed," Mine Ingram, market analyst
at BGC, said.
"Policy-makers have been upbeat, economic data has been a
little soft and we are kept guessing as to who, if anybody, will
be turn out to be right," he said.
(Written by David Brett; Editing by Ruth Pitchford)