* FTSE 100 up 0.2 percent
* Hopes of US budget deal lifts miners, financials
* FTSE 100 approaching "bold" resistance - analysts
* Pearson, Meggitt, Diageo dip on earnings worries
By David Brett
LONDON, Jan 21 Britain's top share index notched
up further gains early on Monday, in tandem with a late rise on
Wall Street in the previous session, helped by talk of a
short-term deal to break the budget impasse in the United
London's FTSE 100 was up 14.87 points, or 0.2
percent at 6,169.87 by 0847 GMT, remaining at four-and-a-half
Trade, however, was expected to be quiet with heavy snow
causing havoc for City workers in London and the United States
closed for Martin Luther King junior day.
In the United States, Republicans said the House would
consider a bill to raise the U.S. debt ceiling enough to allow
the country to pay its bills for another three months, which
would buy time for the Democratic-controlled Senate to pass a
budget plan that shrinks the federal deficit.
"A firm close on Wall Street (on Friday) and hopes of a deal
being struck in the U.S. is helping push the FTSE (100) higher,"
a London-based trader at a large investment bank said.
"But trade is so thin with markets closed in the States, no
important data and snowy conditions keeping a lot of the City at
home, so we could start to suffer from a lack of direction later
on," he said.
The FTSE 100 is also fast approaching some "bold" resistance
according to technical analysts at Futures Techs, who suggest
the index faces a hurdle to get over at the 6,181 level.
Traditional "risk-on" sectors, however, led the way early on
Monday with miners higher. A budget deal in the
United States could underpin the global economy, further lifting
demand expectations in the sector.
Financials added their weight to gains too with
insurer Admiral Group leading the risers on the UK's
FTSE 100, hoisted 5.3 percent higher in light trade by Goldman
Sachs' upgrade to "buy". The investment bank also added it to
its conviction list.
Softening premium rates and regulatory intervention have
seen the shares underperform the over the past 3-6
months. However, Goldman sees potential for claims inflation to
decline faster than the market anticipates improving its
There were signs of caution creeping back into the market as
defensives featured heavily too on the gainers list with the
likes of utilities SSE and Severn Trent up more
than 1.3 percent and drugmaker GlaxoSmithKline up 1.3
Earnings remain a worry for investors with price-to-earnings
multiples on the FTSE 100 looking stretched, having re-rated to
post-credit crisis highs.
European companies start reporting this week. They are
expected to post a 1 percent year-on-year drop in fourth-quarter
earnings, on average, according to Thomson Reuters StarMine.
British education and media group Pearson fell 3.4
percent after warning it expected tough market conditions and
structural industry change to continue into 2013 after it
endured weak trading in the key fourth quarter selling season.
Drinks firm Diageo dipped 1.6 percent as UBS cut its
recommendation on the company to "neutral" from "buy" and
reduced its earnings forecasts for 2014 by 3 percent.
Luxury goods firm Burberry shed 2.4 percent after
Swiss peer Richemont, down 6 percent, issued a cautious
And Meggitt shed 2.9 percent on concerns over the
potential loss of earnings as a probe into faults which grounded
Boeing Co's 787 Dreamliner focused on Arizona-based
Securaplane Technologies Inc, a unit of Meggit, which makes a
charger for batteries used on the aircraft.
(Written by David Brett; Editing by Toby Chopra)