Caterpillar hits construction by cutting forecast

BRITAIN’s benchmark equity index closed lower yesterday, erasing initial gains after US construction equipment group Caterpillar cut its forecast, hitting British engineering stocks.

Traders said the outlook over the next month looked negative for the blue-chip FTSE 100 index, due partly to bearish technical signs and an uncertain global economic outlook.

The FTSE 100 ended down 0.1 per cent, or 5.97 points lower, at 6,280.62 points.

The FTSE is up 6.5 per cent since the start of 2013 but has fallen around 4 per cent from a 2013 intraday peak of 6,533.99 points in mid-March.

The index has also fallen on nine sessions since the start of April and risen on six, which traders said pointed to an overall negative picture.

“Technically, it’s not looking too great at the moment. The price action doesn’t look too healthy since any rallies are not being sustained and are very short-lived,” said EGR Broking managing director Kyri Kangellaris.

Kangellaris said the FTSE could fall back down to 6,000 points “fairly quickly” if any further declines pushed it below 6,200.

Engineering and construction stocks such as AMEC, Melrose and Weir featured prominently on the FTSE’s loserboard after Caterpillar cut its 2013 profit forecast.

However, gold miner Randgold Resources outperformed to rise 4.4 per cent to the top of the FTSE 100, helped by investment company Blackrock’s decision to raise its stake in Randgold to 14.1 per cent from around 14 per cent before.

“The Blackrock news has given it a shot in the arm,” said Securequity sales trader Jawaid Afsar.

Darren Easton, director of trading at Logic Investments, said he saw the FTSE 100 trading within a tight range from roughly 6,210-6,380 points in the coming sessions.

He added he would rather sell – go short – on any rallies in the market, rather than go long by buying the market on days when it dipped.

“Our general preference is to ‘short’ into strength, rather than go ‘long’ into weakness,” he said.

Miton fund manager George Godber favoured stocks with positive cash-flow. He added that he did not have any banks, miners or utility stocks in his portfolio but backed stocks such as retailer Sainsbury and housebuilders Barratt Developments and Berkeley Group.

Meanwhile European shares inched higher as signs of progress to break political stalemate in Italy outweighed fresh downbeat earnings news and concern over the health of the global economy. Milan’s FTSE MIB index, up 1.7 per cent, proved the regional outperformer for most of the day after the re-election of Italy’s President.