London - Britain's top share index shed its early gains by midday on Friday and headed for a fourth straight week of losses, with thin trading conditions before more US data releases prompting investor caution.
US industrial output data for May at 15:15 SA time and Thomson Reuters/University of Michigan's June consumer sentiment index, due at 15:55 SA time, could give further hints about the Federal Reserve's likely move on stimulus measures.
The FTSE 100 index, which fell to its lowest in more than 4 months in the previous session on concerns that the US central bank might start scaling back its bond buying, was flat at 6,305.22 points by 13:21 SA time.
“We have exceptionally low volumes, which are not helping the market. Investors are waiting for more economic data from the United States to have a clearer view about the market's near term direction,” Brenda Kelly, analyst at IG, said.
Volumes on the FTSE 100 were just 32 percent of its 90-day daily average after a half-day trading.
However, charts suggested that the index was likely to recover in the near term after falling for four consecutive weeks to the lowest since late January in the previous session.
“The index has approached a key support level at around 6,200, which coincided with the market being oversold,” Julian McCormack, technical analyst at Brewin Dolphin, said.
“The market has come off nearly 10 percent since late May and the downside is limited with the current oversold conditions.”
The FTSE 100's 9-day relative strength index (RSI) was at 30, suggesting the index had moved into oversold territory and could recover, he said, adding the market could find support at around 6,200 which was held several times this year.
Analysts remained positive on the market's medium term outlook, saying the Fed's accommodative monetary policy was likely to stay longer.
“Yesterday's US data was slightly better than expected, but it was not strong enough for investors to start fretting about quantitative easing (QE) again. We are not expecting QE tapering to happen till the end of this year,” Robert Parkes, equity strategist, HSBC Securities, said.
Thursday's data showed US retail sales rose more than expected in May and first-time applications for unemployment benefits fell last week.
“Over the last five years it has been 'when to sell', it is now 'when to buy'. Investors have been looking for some weakness to get involved again and the recent sell-off provides an attractive entry point,” Parkes said.
However, the pace of gains is likely to slow from here, Parkes said, adding he saw the best opportunities in financials and the other value sectors that were deeply unloved such as energy and telecoms.
Miners rose 2 percent on a rise in metals prices and helped by a note by Citi, which lifted its rating on European miners to “overweight”, citing valuation grounds. - Reuters