FTSE books biggest rise for a month as optimism increases

BRITAIN’S top share index recorded its biggest daily rise in over a month yesterday, boosted by optimism about the US economic outlook as well as the outcome of Greece’s debt negotiations, although charts indicated that momentum could falter.

Cyclical stocks, which tend to perform in tandem with economic growth, rose as US jobless claims data showed labour market conditions in the world’s largest economy were improving, raising expectations ahead of non-farm payrolls data due today. “This has boosted some optimism that today’s jobs report may also come in strong, with current expectations for a rise of 210,000 non-farm payrolls,” said Joshua Raymond, chief market strategist at City Index.

Construction materials, industrial metals and engineering stocks all rose by 2.9 to 3.9 per cent, also helped by talk that China, the world’s second-largest economy and the largest consumer of basic resources, was about to ease its monetary policy to stimulate demand after cutting its GDP growth goal earlier this week.

Also supporting sentiment were signs that Greece was nearing a debt-swap agreement with its private creditors ahead of last night’s deadline.

The deal would allow Athens to avoid a messy default that could leave larger economies such as Italy and Spain in need of financial help.

The FTSE 100 index rose 68.32 points, the most since 3 February, to end the day 1.2 per cent higher at 5,859.73 points, having traded 93 per cent of its 90-day volume average.

Anglo-French property developer Hammerson topped the chart, rising 5.5 per cent in volume that was more than twice the average, with traders citing the impact of a read-across from the sale of a stake in French shopping mall peer Klepierre by BNP Paribas.
“Given Hammerson’s French exposure, this Klepierre deal is sure to provide a boost to valuations and sentiment for the UK-listed firm,” one London-based trader said.

Wm Morrisons also outperformed, rising 1.7 per cent in volume that was nearly triple its average after the food retailer posted forecast-beating full-year earnings.

Traders and technical analysts said the market could be ripe for some profit-taking in the coming days as recent catalysts faded and charts pointed to faltering momentum.

“A lot of people rally ahead of the actual deal, and once the deal comes the market comes off,” Trevor Coote, head of equity sales at Alexander David Securities, said.

“My feeling is the market will drift off: the Greek deal will probably go ahead, but then what else can push the market higher?”

He said he was waiting for the FTSE 100 to fall as low 5,620, driven by a correction in recent outperformers such as miners, before he would buy back into the market.

Charts on the index pointed to “limited downside” for the coming week, Philippe Delabarre, a technical analyst at Trading Central in Paris, said, adding the index was likely to be heading towards support levels at 5,755 and 5,710.

“The 20-day simple moving average is turning down, and the daily RSI (relative strength index) has broken below a significant horizontal support at 52,” Delabarre said.

Delabarre, however, did not expect the declines to be imminent, saying the FTSE could hit highs of 5,870 or even 5,905 in the very short term before turning lower.