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FTSE drifts lower, technical levels offer support
August 16, 2013 / 11:32 AM / 4 years ago

FTSE drifts lower, technical levels offer support

* FTSE 100 down 0.1 percent

* 50-day moving average, at 6,451, to provide support

* Fresnillo leads; gold set for best week in a month

By Tricia Wright

LONDON, Aug 16 (Reuters) - Britain’s top shares drifted lower on Friday as concern over less central bank stimulus took its toll on sentiment, though with the index finding technical support in the wake of steep falls in the previous session.

The FTSE 100 was down 5.41 points, or 0.1 percent, at 6,477.93 points by 1109 GMT, stabilising after a 1.6 percent drop seen in the previous session.

Analysts said that the 50-day moving average, currently at 6,451, would provide short-term support.

“We’re sat on technical levels which I think is holding us up,” CMC Markets trader Matt Basi said.

“A lot of clients are saying that a break beneath 64 (6,400)is the indicator for the next level down but at the moment we’re around the moving average and for now it’s likely that we’ll drift around this level.”

The FTSE 100’s steep falls on Thursday came after robust U.S. jobless claims data, which fuelled concern the U.S. Federal Reserve might, from next month, start cutting back its stimulus - one of the major drivers of this year’s equity market rally.

“I think this is just deflating a little bit of the QE (quantitative easing) induced valuations to certain equities,” Paul Kavanagh, a partner at Killik & Co, said.

“I would say that the nearer it gets back down to 6,000 again the more aggressively positioned one would be... because you would start to see some valuations coming back into stronger buy territory.”

Kavanagh sees opportunities in the mining sector, the biggest fallers this year by some margin, with the FTSE 350 Mining index down some 13 percent.

Over the period, the STOXX 600 Basic Resources index’s 12-month forward price/earnings ratio has fallen to 10.5 times from 11.3 times, according to Thomson Reuters Datastream.

He also highlighted ad group WPP which, according to Datastream, trades on a 12-month forward price/earnings ratio of 13.4 times against its 15-year average of 16.5 times.

Gold miners Fresnillo and Randgold Resources led the risers on Friday with respective gains of 5.2 percent and 4.4 percent, with the precious metal set for its biggest weekly gain in a month. (Reporting by Tricia Wright, additional reporting by Francesco Canepa; editing by Ron Askew)

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