ITAIN’S top share index slipped yesterday, hurt by testing firm Intertek on worries over a slowdown in its business, though analysts were confident that technical support would cap any weakness in the broader market.
Intertek, a company specialising in safety and quality tests, fell 2.5 per cent after saying headwinds experienced in the first half of the year have continued into the second half.
Shore Capital kept a sell recommendation on Intertek, arguing that the company may have more downgrades to forecasts.
The FTSE 100 closed down 25.45 points, or 0.4 per cent, at 6,698.01 points, retreating further from a five-month high of 6,819 hit on 30 October. Volumes were light, with the index having traded just over three-quarters of its 90-day daily average.
“Any downward drift I think is going to be a buying opportunity. You’ve got layered support,” said Barclays Capital analyst Lynnden Branigan, referring to the November low at 6,613, the 50-day moving average at 6,607, and the 100-day moving average at 6,565.
Valuations on UK equities are still above long-term averages, having gained nearly 14 per cent in 2013 on huge quantities of cash pumped into the financial sector by central banks.
The FTSE 100 now trades on a 12-month forward price/earnings ratio of 12.7 times, above its 10-year average of 12 times, Thomson Reuters Datastream shows.
This is despite downbeat corporate results. Nearly two-thirds of European firms have missed revenue expectations in the current quarter, while 48 per cent have missed forecasts at the profit level, Thomson Reuters Starmine shows. Some analysts believe that in 2014 the main driver for stocks will be a further improvement in the global economy rather than rising valuation multiples.
Meanwhile, Budget airline EasyJet jumped 7.1 per cent after it underlined its growing advantage over struggling Irish rival Ryanair, reporting annual profit at the top end of forecasts and returning cash to shareholders.
And engineer Amec rose 1.5 per cent after saying trading had been boosted by strong performances in the UK North Sea and the US Gulf of Mexico.
George Godber, who runs Miton Group’s UK Value Opportunities Fund, said valuations in the market have become stretched but he too sees opportunities in cyclicals, namely from miners.