February 17, 2012 / 9:26 AM / 6 years ago

FTSE edges higher as Greece nears debt deal

* FTSE up 0.3 percent

* Optimism grows for imminent Greek debt deal

* Miners rally with Anglo American up after results

* Ashmore, Schroders fall on broker downgrades

By David Brett

LONDON Feb 17 (Reuters) - Britain’s top share index nudged higher on Friday as investors responded to bullish newsflow out of Greece, which suggested the embattled euro zone periphery, after weeks of delays, might now be on the verge of securing its second vital bailout.

London’s blue chip index was up 19.72 points, or 0.3 percent, at 5,905.10 by 0909 GMT, as the FTSE 100 continued to struggle to break out of its recent range between about 5,850 and 5,900.

Time is running out for Greece to seal the 130 billion euro ($170 billion) rescue and avoid bankruptcy.

But one euro zone official said: “Unless someone really comes up with an idea to undermine the whole deal, it should be approved on Monday.”

In a further sign of an emerging agreement, euro zone sources said national central banks in the currency bloc would exchange holdings of Greek bonds this weekend in the run-up to a private sector debt deal to avoid taking forced losses.

Markets remained cautiously optimistic with bond yields in other indebted euro zone countries such as Italy and Spain easing slightly, while riskier UK-listed equities such as banks and miners edging marginally higher.

The cost of insurance on Greek debt, however, continued to suggest in the longer term Greece could eventually default albeit in an orderly manner.

“We’ve been down this road so many times we have got to be prepared to be disappointed again,” David Morrison, strategist at GFT Global, said.

Morrison said you could throw a small blanket over the range the FTSE has traded in since the leg-up at the start of 2012, as traders remain fully aware that any deal for Greece could just be a short-term fix and contagion continues to be a real fear stifling markets.

He said should an agreement not be reached and Greece does default there will be very few safe havens in which investors can take cover, with the dollar, Swiss franc and U.S. T-bills the most likely shelter.

Miners were the top gainers, following a bout of profit-taking over the previous three sessions.

Anglo American rose 1.4 percent, having shed 7.6 percent over the previous five trading days, as the global miner reported a 14 percent rise in full-year operating profit, albeit just shy of the company’s own consensus of analyst estimates.

Gold miner Randgold was the top performer, however, up 3.2 percent in another sign investors were cautious awaiting a deal out of Europe, as the equity is traded as a play on the safe-haven yellow metal.

Banks gained too as any deal struck with Greece would remove some uncertainty over their balance sheet exposure to Europe’s debt crisis. Royal Bank of Scotland climbed 2.6 percent.

Broker comment weighed on other financial stocks, with Ashmore down 1.9 percent as Canaccord downgraded the emerging markets focused fund manager to “hold” from “buy” and HSBC cut its recommendation on Ashmore to “underweight” from “neutral”.

The top FTSE 100 faller was Schroders, down 1.0 percent as Citigroup downgraded its rating on the UK asset manager to “sell” from “neutral”

“On rising markets UK asset managers are up an average 15 percent, and Schroders up 18 percent. We believe fund managers must now see near-term fund flow recovery to justify recent share price performance, not just rising markets,” Haley Tam at Citigroup said.

“We estimate Schroders in 2012 would need a 25 percent equity market rally and +10 billion pounds intermediary net fund inflows (2011E -5.0 billion pounds) to justify current share price levels,” Tam said.

Schroders trades on a 12-month forward price-to-earnings of about 14.9 times according to Thomson Reuters data, compared with around 10.6 times for the FTSE 100,

British investment manager Hargreaves Lansdown shed 0.1 percent.

After data on Thursday showed the U.S. economic recovery was kicking up a gear, investors’ focus will switch back to the UK early on Friday.

UK retail sales data for January are due for release at 0930 GMT. Analysts polled by Thomson Reuters expect a 0.4 percent fall from December, when retail sales had risen 0.6 percent month on month.

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