* FTSE 100 up 1.6 pct, rising for second consecutive day
* Vodafone adds most points to FTSE, AstraZeneca biggest
* FTSE still down around 3 percent in 2014
By Tricia Wright
LONDON, Feb 6 Britain's top equity index rose
for a second straight day on Thursday, led by strong gains from
heavyweight telecoms group which helped the market
recover its poise after a recent five-day losing streak.
The blue-chip FTSE 100 index, which had fallen for
five straight days during the past two weeks, closed up 100.39
points, or 1.6 percent, at 6,558.28 points.
Investors had been unnerved by signs of slower Chinese
growth and the withdrawal of U.S. monetary stimulus, concerns
that spread from emerging markets to the world's big stock
A 3.7 percent rise in Vodafone, after the mobile operator
expressed confidence that its revenues would improve,
contributed the most points to the FTSE 100 index on
Toby Campbell-Gray, head of trading at Tavira Securities,
said Vodafone kept attracting investors because of its solid
dividend yield and because of speculation about a takeover, even
though AT&T ruled out a bid for Vodafone last month.
"Vodafone's a quality stock. Why wouldn't you buy them?"
A bounce back in emerging market currencies proved
supportive to the likes of consumer goods maker Unilever
and brewer SABMiller, which have big EM
exposure. For a list of European blue-chips with the most
exposure to emerging markets:
And, with much of the market focus on Friday's U.S. non-farm
payrolls report, investors took heart from a
better-than-expected report on U.S. weekly initial jobless
"This bounce could be due to speculators abandoning their
bearish positions ahead of the NFP tomorrow. All eyes will be on
the 200-day moving average again (currently at 6,563). If the
index closes above it... tomorrow then we could well see some
healthy gains next week," Gain Capital technical analyst Fawad
One cause for concern is that the earnings picture overall
remains mixed, underscored by a warning from AstraZeneca
that it has another difficult year ahead in the face of generic
competition for its popular heartburn and ulcer drug Nexium.
Its shares dropped 1.6 percent, the biggest drag on the UK
benchmark. The loss trimmed the drugmaker's advance this year to
around 7 percent, as analysts flagged a likely downgrade to the
consensus forecast for its 2014 earnings.
"Our initial conclusion is that guidance will disappoint and
consensus EPS forecasts will fall by at least several percent,
while recognizing that the shares' recent performance owes
little to near-term fundamentals and much to long-term pipeline
hopes," Deutsche Bank said in a note.
Cautious results statements are sounding alarm bells for
investors who had been betting on a recovery in European
earnings as the main driver for an equity market rally in 2014.
With the market already trading at lofty valuations after a
bumper 2013, bolstered by central bank stimulus, analysts say
that valuations have little scope to make further gains, which
means earnings must increase before prices can.
The FTSE 100 trades on a 12.9 12-month-forward
price/earnings ratio, against its 10-year average of 11.9,
Thomson Reuters Datastream shows.
A lacklustre start to the earnings season has contributed to
a drop of around 3 percent on the FTSE 100 in 2014.
Of the 26 percent of European companies to have reported so
far, 39 percent have missed profits expectations and 44 percent
have missed expectations on revenue, Thomson Reuters Starmine
But investors with a view over all of 2014 remain bullish,
expecting a pick-up in earnings in the next quarterly reporting
"The fact that clients are still happy to position
themselves long and not to take aggressive shorts on the index
against their long equity positions probably suggests that
they're confident that there will be a turnaround," said Matt
Basi, head of sales trading at CMC Markets.