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Britain's FTSE hits 5-month high, then stalls on profit-taking
October 28, 2013 / 12:21 PM / 4 years ago

Britain's FTSE hits 5-month high, then stalls on profit-taking

* FTSE 100 down 0.1 pct after hitting 5-month highs
    * IHG falls on results, Aggreko gains
    * Index just above 6,700, next resistance seen around 6,750

    By Toni Vorobyova
    LONDON, Oct 28 (Reuters) - Britain's top share index edged
down on Monday after hitting a five-month high, with a rally
stalling just above the key 6,700 points level as a mixed crop
of earnings led to profit-taking.
    InterContinental Hotels led the fallers, down 2.4
percent after third quarter revenue in the Americas just missed
expectations and sales growth slowed in September.
 
    Faced with a lacklustre earnings season, analysts have
started to push back their expectations for a recovery in
corporate profits, seen as key to continued equity market gains
after a rally fuelled by central bank liquidity.
    Over the past month, earnings momentum on the FTSE 100 -
analyst upgrades minus downgrades - has fallen to -2.8, its
lowest since August 2012, according to Datastream.
    But with Wall Street hitting repeatedly hitting record highs
and growing expectations that central bank stimulus will
continue for some time to come, many expect equities to remain
well supported even if the upward momentum fades.
    "There is bound to be a bit of profit taking  (but) I think
we can be fairly bullish on the market while we stay above 6,700
(on the FTSE)," said Jonathan Roy, sales trader at London Stone
Securities.
    The FTSE 100 was down 5.26 points or 0.1 percent at 6,716.08
points by 1146 GMT, showing some signs of running out of steam
after rising in 11 of the past 12 sessions and scaling a 5-month
intra-day high of 6,739.66 points.
    "It's been extremely strong for weeks," said Clive Lambert,
technical analyst at FutureTechs.
    "It's too early to bet against the recent rise ... but if
you look at historical charts we are getting close to massive
resistance. The FTSE has got a lot of challenges immediately
above it which is something to be wary of," he added, noting the
6,750 area which served as a peak in 2007 prior to a sharp
downward correction.
    Aggreko led Monday's gainers, up 4.6 percent after
the temporary energy provider said it expected underlying
revenues and margins to be ahead of the prior year both in the
second half and on a full-year basis. 
    Traders said that although the figures were in line with
expectations, it was being squeezed higher as people took off
"short" bets on future falls in the share price.
    To short, traders borrow a stock they do not own and sell
it, hoping to be able to buy back it more cheaply at a later
date when they need to repay the loan. 
    For Aggreko, 25 percent of the shares available to lend were
out on loan as of Oct. 25, according to Markit data, the fifth
highest utilisation rate in the FTSE and leaving room for a
spike as investors bought back the shares to cover positions. 

 (Reporting By Toni Vorobyova; Editing by John Stonestreet)

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