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FTSE snaps year's longest streak of gains, pressured by weak outlooks
February 13, 2014 / 4:00 PM / in 4 years

FTSE snaps year's longest streak of gains, pressured by weak outlooks

* FTSE 100 down 0.6 pct

* Outlooks from Rolls Royce, Tate & Lyle and Lloyds disappoint

* UK benchmark looks vulnerable, currently testing 50-day MA

By Tricia Wright

LONDON, Feb 13 (Reuters) - Britain’s top share index fell on Thursday after six straight days of gains, its longest rising streak of the year, led down by food ingredients firm Tate & Lyle and engineer Rolls Royce, which gave disappointing outlooks.

Tate & Lyle lost the most in percentage terms, down 16.2 percent after it scaled back its full-year outlook, citing weak sales volume in developed markets.

Fellow European consumer staple Nestle also fell after giving a caution on outlook, further denting sentiment towards the sector, with the FTSE 350 Food producers 1.6 percent weaker.

Rolls Royce, down 15.3 percent, took the biggest chunk out of the FTSE - knocking 13.3 points off the index.

Although the engineer’s profit rise beat forecasts, its outlook was disappointing, saying it expected 2014 profits to be flat on the back of declining defence and marine revenues.

The downgraded outlooks cast doubt on a much hoped-for earnings recovery this year, which many analysts are depending on to fuel strong stock market gains this year.

Of FTSE 100 companies that have reported quarterly earnings so far, 39 percent have missed profit expectations.

“I thought we were probably going to have to beat earnings just to hold steady on the FTSE 100, so given the misses we’re seeing, I‘m not surprised we’re lower,” said Toby Morris, senior sales trader at CMC Markets.

“We got ahead of ourselves at the back-end of last year, and reports are going to be scrutinised a lot more,” he said, citing the banking sector as under particular pressure.

The FTSE 100 was down 42.74 points, or 0.6 percent, at 6,632.29 points by 1526 GMT.

The UK benchmark had staged a 4 percent rally from early February lows until Wednesday’s close, recouping more than half of a rout since late January on political and economic concerns in emerging markets.

The index tested the 6,680-6,700 range on Wednesday, a former area of support corresponding to 61.8 percent of the Fibonacci retracement down from the January high.

Technical analysts sounded a note of caution, seeing scope for this range to turn into resistance, at least in the short-term, and indeed for the FTSE 100 to see more losses.

“The index is currently testing the 50-day moving average (6,633) as support, a closing break below which could pave the way for the 200-day average at (6,567),” said Fawad Razaqzada, technical analyst at FOREX.com.

Lloyds fell 3.5 percent even after its return to profit, with traders citing disappointing guidance for the bank, media scrutiny over its bonuses and a strong run-up which saw it hit five-year highs in January after gaining 65 percent in 2013.

“The regulatory environment remains austere, the level of competition in the industry is increasing and the ongoing growth in the return on capital number will remain under pressure,” said Richard Hunter, head of equities at Hargreaves Lansdown.

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