UK stocks flat

Published Jan 4, 2013

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Britain's top shares were flat on Friday as investors' took stock after a New Year surge which has pushed the index up to 17 month highs.

Caution that the US Federal Reserve may end its asset-buying programme ahead of time slightly soured investors' recent appetite for shares in the run up to key US jobs data.

Minutes from the Fed's December policy meeting released after London's close on Thursday showed some voting members of the Federal Open Market Committee were increasingly worried about the potential risks of the Fed's asset purchases on financial markets, even if it looked set to continue an open-ended stimulus programme for now.

The Fed said last month it would keep interest rates near zero until unemployment - expected to have stayed steady at 7.7 percent in December - fell at least to 6.5 percent, as long as inflation does not rise above 2.5 percent.

“The Fed comments are weighing, particularly with the always important US jobs data imminent, although realistically it is still more about some consolidation after the new year surge, with miners the most under pressure having led the leap,” Mike Mason, senior dealer at Sucden Financial Private Clients said.

Cyclical stocks, those most exposed to the vagaries of the economic cycle such as miners and banks were the main fallers as a withdrawal of support from asset-buying programmes could hurt the global economy.

Mexican silver miner Fresnillo was the top FTSE 100 faller, down 5.4 percent as UBS downgraded its rating for the stock to “neutral” from “buy” citing valuation grounds.

Precious metals peers Randgold Resources and Polymetal International were also weak, both down 3.2 percent.

The energy sector, however, bucked the weaker trend for cyclicals, buoyed by gains in BP which was a top blue chip riser, up 1.0 percent, and alone added over 3 points to the FTSE 100 index.

Switzerland-based rig contractor Transocean has agreed to pay a lower-than-expected $1.4 billion to settle US government charges over BP's massive Gulf of Mexico oil spill in 2010 and the firm admitted that its crew on the Deepwater Horizon was partly responsible. Last year, BP reached a $7.8 billion plaintiffs liability settlement.

Otherwise defensive stocks, those less exposed to the economic cycle, provided the majority of blue chip gainers with drug stocks standing out.

GlaxoSmithKline added 0.4 percent and AstraZeneca gained 0.3 percent as Nomura hiked price targets for both in a review of the European pharmaceuticals sector.

At 11:01 SA time, the FTSE 100 index was down 1.61 points, or 0.01 percent at 6,045.73, having closed 0.3 percent higher on Thursday at another 17-month high, extending Wednesday's 2.2 percent surge.

“Although the longer-term FTSE chart suggests a possible move to 6,094.00, it's hard to conceive new buyers showing up at current price levels considering their tendency to enter more aggressively following meaningful corrections,” James A. Hyerczyk, analyst at Autochartist said.

“This being said and based on the near term range of 5,873.40 to 6,051.30, a correction back to a value zone at 5962.35 to 5941.36 is likely, giving investors who missed this current short-covering rally, a chance to buy at more favourable price levels.” - Reuters

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