BRITAIN’S blue-chip stock index staged a technical bounce yesterday, helped by a rally in housebuilders as analysts flagged buying opportunities in shares that have underperformed recently.
The FTSE 100 had shed 1.6 per cent over the previous two days. However, charts showed the trend for the index remained up and investors were still prepared to buy into market dips, betting on a recovery in the global economy despite geopolitical tensions in Ukraine and volatility in emerging markets.
The FTSE closed up 44.92 points, or 0.7 per cent, at 6,635.61 points, bouncing from technical support corresponding to its 200-day moving average and a 61.8 per cent retracement of its February rise.
It was now facing technical resistance at its 50-day moving average at 6,653 points. A break above that level could pave the way for a rise towards the index’s February peak at around 6,860 points.
“We’re still seeing a series of higher lows, which is somewhat promising,” said Roelof-Jan Van den Akker, senior technical analyst at ING.
“We’re now trying to break through the 50-day moving average line ... and I expect this will happen in the next few days, followed by a break above the recent peak at 6,706 for another rally towards strong overhead horizontal resistance at 6,840.”
Housebuilders were buoyed by a bullish note by Deutsche Bank, which said the sector’s sensitivity to interest rates has been overestimated.
Barratt Developments was among top risers with a 3.9 per cent rise, while among midcaps Taylor Wimpey added 3.7 per cent and Bovis Homes climbed 1.8 per cent, as Deutsche Bank named the trio as its top picks.
The Thomson Reuters UK homebuilding index had fallen 13 per cent from its February peak, compared with a four per cent fall for the FTSE, as investors started betting the Bank of England would bring forward an interest rate hike, making mortgages more expensive.
The sector index had doubled in value during the past three years, underpinned by tight supply and British initiatives to spur the job-intensive sector, such as the Help to Buy mortgage scheme.
Asia-focused bank Standard Chartered, up 2.8 per cent, was also among top gainers, benefitting from an upbeat tone in Asian markets.