* FTSE 100 up 0.1 percent, clings on to 6,100 level
* Drugs stocks helped by UBS strategy upgrade
* IAG, Aviva lifted by broker rating changes
* Miners weak as Chinese inflation picks up
By Jon Hopkins
LONDON, Jan 11 Britain's top share index edged
higher on Friday, adding to a strong run since the start of the
year, with gains in heavyweight pharmaceutical stocks providing
the main support.
At 0917 GMT, the FTSE 100 index was up 1.86 points,
or 0.1 percent at 6,103.37, having closed above 6,100 for the
first time since May 22, 2008 on Thursday.
"I think the current rally will come to an end over the next
couple of months. Stock prices are quite overvalued given that
revenues continue to be poor and the outlook for 2013 for large
parts of the world is slowing growth, or in the case of the euro
zone, negative growth. (Although) In the shorter term, January
is likely to remain positive for equities," Craig Erlam, market
strategist at Alpari (UK) said.
Gains by heavyweight drug stocks lent the main strength to
the UK blue chips, helped by an upgrade for the heathcare sector
to "overweight" from "neutral" by UBS in a UK strategy review,
following a 12 percent underperformance since July, with
AstraZeneca and Shire its preferred picks.
"We switch our preferred defensive play to the healthcare
sector, and downgrade utilities and aerospace & defence to
neutral," UBS said in a note.
Broker comment also boosted IAG, the top FTSE 100
gainer, up 3.7 percent. Traders cited the impact of an upgrade
by UBS to "buy" from "neutral" for the owner of British Airways
and Iberia, mainly on valuation grounds.
"Despite its share price being up over 25 percent in 2012,
IAG was 'the worst performing European airline share under our
coverage', underperforming Lufthansa by over 30 percent and Air
France KLM by circa 45 percent. We think that IAG could be the
laggard most likely to outperform in 2013," UBS said in a note.
Insurer Aviva was also in demand, up 2.3 percent
after Citigroup upgraded it to "buy" from "neutral".
"We think Aviva is one of the most attractive opportunities
in the sector this year. Despite recent gains, Aviva trades at a
substantial discount to UK peers ... and European composites.
Most importantly we see a number of catalysts from management
actions to close this gap in the next two years," Citigroup
Weakness in miners was the biggest drag on the
blue chips as a pick-up in Chinese inflation data dented recent
optimism over demand from the world's top consumer of metals.
"The rollercoaster ride for data from China continues to
drive the heavyweight mining sector, with today's inflation news
a disappointment, although the main focus will be on China GDP
numbers next week and the prospects for the main engine of
global growth," Mike Mason, senior trader at Sucden Financial
Private Clients said.
Tullow Oil was the biggest FTSE 100 faller, down 4.7
percent as Europe's biggest independent oil and gas explorer
issued a mixed trading statement.
"Small miss on FY12 production but 2013 sees a return to a
much a busier E&A (exploration and appraisal) programme," Oriel
Securities said in a note, reiterating its "add" stance on
UK stocks showed no reaction to data showing British
industrial output grew less than expected in November, despite a
strong rebound in oil and gas production, with the numbers
adding to evidence that the economy may have contracted in the
last three months of 2012.
(Editing by Nigel Stephenson)